July 20, 2022/CSL Research
There were speculations yesterday that the Nigerian National Petroleum Company (NNPC), now limited, approved an upward review in the pump price of Premium Motor Spirit (PMS) from N165/litre to N179/litre. These speculations were on the back of a document being circulated and titled PMS pump price adjustment. The document referred to the PPMC’s approved N165/litre price of petrol as the old price and outlined the new rates for the commodity in different regions of Nigeria. There has been a lingering petrol shortage, and some marketers currently sell petrol above the approved pump price.
Petrol marketers under the aegis of Major Oil Marketers Association of Nigeria had on Wednesday last week, alongside the Independent Petroleum Marketers Association of Nigeria (IPMAN) and the Natural Oil and Gas Suppliers Association (NOGASA) held a meeting with the government to call for a gradual increase in the price of PMS. These associations have been pushing for an upward review of petrol price, as some members of IPMAN were already selling above the N165/litre government-approved price. Several marketers currently dispense petrol at N180/litre and above in many states, including Abuja, Lagos, Ogun, Imo, and Niger, among others.
The petrol unions are calling for a review of the pump price because the hike in the price of diesel has caused a substantial increase in the operational cost of marketers. Diesel is used to power trucks and run the stations and depots. The unions insist that the available options were to either save their businesses by shutting them down, or the government allows a gradualphasing out of subsidy by allowing a gradual price increase. There were reports last week hinting that oil marketers and the Nigerian Midstream and Downstream Petroleum Regulatory Authority had secretly agreed to slightly increase the price from N165/litre to between N175-N180/litre. The document in circulation is likely an offshoot of this covert agreement and is likely being used to test the waters.
An analysis of NNPC’s monthly fuel subsidy cost indicated a continuous rise in the amount incurred as subsidy by the Federal Government through NNPC. Data from the national oil company showed that N210.38bn, N219.78bn, N245.77bn, N271.59bn and N327.1bn were spent on subsidies in January, February, March, April and May 2022 respectively. The subsidies referred to as under-recovery/value shortfall are usually deducted every month before making any remittance to FAAC, a development that has stopped NNPC from remitting anything to the Federation Account this year.
While being mindful of the heightened cost of living, with inflation at 18.6%, we are concerned that the Federal Government lacks the capacity to continue funding the skyrocketing cost of subsidy. As things stand, it is apparent that the petrol price needs to be reviewed upward. Though we rule out a full elimination of the subsidies, we are convinced that a hike in price is imminent. We also realise that any price hike, no matter how small, will be a big burden to the already impoverished Nigerian consumer.
