The recent adjustment of pump prices across the country by fuel marketers has attracted various reactions from the masses as they groan over the burden mounted on them by a myriad economic challenge. An adjustment was made on Friday as a result of the increase in the ex-depot price of Premium Motor Spirit (PMS) from N147.67 to N155.17 per litre. Marketers may adjust pump price to N168-N170 per litre, going by previous adjustments. The previous depot price of N147.67 sold within the rate of N154 and N161 per litre. There have been consistent increase within the last five months from N121.50-N123.50 in June to N140.80-N143.80 in July, and from N148-N150 in August to N158-N162 in September.
The oil marketers, under the aegies of Natural Oil and Gas suppliers Association of Nigeria (NAGOSA), had earlier lamented the adverse operating environment in the downstream petroleum sector with the loss of about N320 billion during the Covid-19 pandemic. President Muhammadu Buhari had also told Nigerians to prepare for a reality-based price adjustment in the country during his independence speech. The current pandemic has brought about a fuel demand crash worldwide, as EIA said that permanent shutdowns of refinery capacity had reached 1.7 million barrels per day (bpd).
Earlier this month when the crude oil price fell to $37 per barrel, Kennie Obateru, spokesperson of the NNPC, announced that it could take a while for the reduction in the crude oil price to reflect in the pump price, maintaining that the current product was ordered based on the old price of crude. He also assured that the corporation would not hesitate to reduce the price as soon as other prevailing factors, including the exchange rate, favours such move. However, a price increase was announced yesterday.
The introduction of monthly templates by the Petroleum Products Pricing Regulatory Agency (PPPRA) had brought hope to consumers who taught that fuel prices would be adjusted for this month to a retail price band of N143-N145/litre. This was the case when oil traded within the same margin in June.
Industry stakeholders have raised concerns over the monopolistic nature of the market since NNPC continues to be the key importer. The situation ought to have been handled with the introduction of deregulation. Nigeria had earlier this year announced deregulation of the downstream segment of the industry, still there has been no significant price improvement.
There have been various reactions with the price hike as it seems there might still be a probable increase. The need for the government to demonstrate a high level of transparency in the deregulation process has been emphasized by the public, with the expected savings wired into infrastructural development that would enhance economic recovery.
Jude Ojo, an economic expert stated in response to the fuel price hike that the nation is going through a difficult time and more private sector participation in the refinement of crude oil is necessary. He also asserted the need for the passage of Petroleum Industry Bill (PIB) to help the downstream and upstream sectors of the industry. As more players come into the trade, the competition will beat down the price.
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Pundits said that based on market fundamentals, the price will naturally be adjusted to reflect a true picture of the market at any particular period, high or low. The recent slump in global crude oil price and the outbreak of Covid-19 pandemic which led to the lockdown that impacted the economy, left the Nigerian Government with no option but an increase in the price of PMS. However, market fundamentals also hinge on supply and demand.
The envisaged low pump price can only be achieved with the existence of at least one local source or provider of refined products. The measure can only be feasible if the downstream sector is working in its true meaning within the economy. There is a need to emphasize local refining but for now, a possibility for a reduction in fuel price with the global challenges seems vague.
Photo Credit: Independentng