Executive Secretary, Petroleum Products Pricing Regulatory Agency (PPPRA), Abdulkadir Saidu, has said that in line with deregulation process of the nation’s oil industry, the agency no longer fixes prices but provides a guiding price band within which the operators are expected to operate.
PPPRA in a statement personally signed by Saidu stated that the new policy takes into account prevailing market conditions by monitoring petroleum products prices daily, using the average price of the previous month and other components like foreign exchange rates to determine prices for the following month, while ensuring reasonable returns to Oil Marketing Companies (OMCs).
According to Saidu, under the Market-based pricing regime, products prices will be determined by market forces. This he said explains the recent downward and upward movements in the guiding pump price band of PMS, which reflects market realities.
“It is important to note that applicable Petroleum Products Cost accounts for about 80 per cent of the pump price of petroleum products. Correspondingly, if the price of crude oil is low, it stands to reason that pump prices will come down and similarly, when prices increase, pump price will be expected to go up reflecting market trends”.
Saidu said to ensure availability of foreign exchange to importers to enable them procure the products and sell at Expected Open Market Price (EOMP), the agency is already engaging the Central Bank of Nigeria (CBN)
“Under the Market-based pricing regime, products prices will be determined by market forces. This explains the recent downward and upward movements in the guiding pump price band of PMS, which reflects market realities. In the same vein, Foreign Exchange (Forex) rates also play a significant role in determining the guiding pump price of petroleum products. To this end, the Agency is engaging with the Central Bank of Nigeria (CBN) to ensure availability of the required Forex for the importation of petroleum products and the modality for marketers to access Forex at the applicable window”.
Executive Secretary said since the commencement of the new price regime which heralds full deregulation of the sector, a considerable increase in the level of Oil Marketing Companies’ participation in PMS importation has been recorded adding that in recent years, OMCs withdrew from product importation, but since the Federal Government’s pronouncement on 19th March 2020, over 536,000 metric tons of PMS have been directly imported by the OMCs.
“Additional investment in local refining is gaining traction and is expected to engender more competitive pricing. The Dangote Refinery with a refining capacity of 650,000 barrels per day will certainly impact positively on the price of PMS in the market when it commences operations in 2022. We expect to see more investment in modular and conventional domestic refining going forward”, he said.
He said deregulation of the sector is in the country’s best interest because competition has a way of forcing down prices and ensuring that companies place a tight rein on production cost such that wastes that could be passed on to consumers in form of high prices are eliminated.
“The trillions of Naira that would have been spent subsidizing PMS could be injected into other key sectors such as agriculture, education, health, power and infrastructure. There will also be focus on the provision of social safety nets for the poor who bear the brunt of the COVID19 pandemic”.