Nigerians should be ready to pay high or low prices for petrol following the price liberalisation scheme currently in place, the Petroleum Products Pricing Regulatory Agency said on Monday.
The PPPRA is also engaging with the Central Bank of Nigeria to determine the applicable foreign exchange rates for the importation of petroleum products by oil marketers.
The agency’s Executive Secretary, Abdulkadir Saidu, said these while answering questions on the new PMS price regime in Nigeria.
He said, “What we have in place is a market reflective pricing system. Petroleum products prices will be adjusted in line with market realities and the result is what we see presently with prices on the downward slide.
“Accordingly, price will naturally be adjusted to reflect a true picture of market fundamentals at any particular period, high or low.”
He, however, noted that efforts were being made to develop alternative fuels to the PMS by deepening the utilisation of Liquefied Petroleum Gas/Compressed Natural Gas as auto gas in Nigeria.
Saidu said this would come into fruition in the medium term and would help to cushion the effect in case of a situation of high oil price.
On what the PPPRA was doing to ensure that marketers get forex at the official rate to promote price affordability, he said the agency was working with the CBN on this.
Saidu said, “The agency is engaging with the CBN to determine the applicable forex rates for the importation of petroleum products and modality for accessing the applicable forex window by marketers.
“This rate is reflected on the pricing template to determine the Expected Open Market Price of the product. This means that going forward, the guiding price to be advised will be determined based on the rates quoted by the CBN.”
The PPPRA boss said the price would guide the sale of the PMS in Nigeria, adding that the agency planned to extend the same pricing mechanism to kerosene, diesel and others.
Saidu noted that the essence of the price band was to ensure price efficiency that would be beneficial to both consumers and oil marketers.
He explained that the market-based pricing regime came into effect on March 19 following government’s approval for the adjustment of PMS price from N145 to N125/litre.
“Going forward, pricing of the PMS will reflect market fundamentals. The PPPRA will continue to monitor price trends and advise monthly guiding price for all petroleum products, based on prevailing market realities and other pricing fundamentals,” he stated.
Saidu explained that the recent plunge in oil price occasioned by the outbreak of COVID-19 and slowing global oil demand had a direct bearing on the EOMP of petrol, pushing it to a level below the pump price cap of N145/litre.
This, he said, made the government to order the Nigerian National Petroleum Corporation to review downward its ex-coastal price of petrol.
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Saidu said, “Furthermore, the plunge in global crude prices made it increasingly difficult for government to finance the 2020 national budget as it was predicated on a crude price of $57 per barrel.
“The low crude oil prices, therefore, presented the opportunity to address the lingering challenges associated with the under/over-recovery regime and free up vital funds required to develop other key sectors of the economy.”
He said the new initiative would also stimulate private investment in the downstream sector and encourage the resumption of products importation by marketers, a development that would revive many dormant depots.
Saidu stated that under the new regime, PPPRA would continue to carry out all its mandates such as determining the pricing policy of petroleum products and regulating the supply and distribution of products.
He expressed optimism that the upcoming Dangote Refinery and other modular refinery projects nationwide would be able to key into the new pricing regime.