How petrol price can be lower than projected N482/l after full deregulation

As the Federal government continues to fly the kite on full deregulation of petrol price, industry analysts say the pump price could be lower than the projected N482 per litre if the supply of petroleum products are driven by competition and the federal government does not peg the pump price of the product.

The Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCLtd) has hinted that the pump price of petrol could rise as much as N482 per litre if Nigeria finally removed subsidy.

But oil and gas experts believe the price could be lower than that projection when there is competition and government does not control price.


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A jump in fuel price from the current average of N174 per litre to N482 would constitute an increase of 168 per cent.

“Prices are higher in Nigeria because only the Nigeria National Petroleum Company Limited is importing. Why is it only the NNPCLtd that is importing? This is because the price is set,” an economist and financial investment expert, Kalu Aja said.

Aja stressed that the price could drop when government removed the price cap and allowed free entry and exit of market competitors.

“When supply is driven by competition, price naturally goes down,” he said.

He pointed out that Dangote’s refinery, that is expected to come on stream next year would help Nigeria refine locally and save some transportation and freight charge costs.

“Dangote gets crude oil from Nigeria, refines in Nigeria, sells in Nigeria. That takes away the demurrage and freight charges. When we get all these together, it can help the possibility of price coming down,” he said.

The Dangote Refinery is a private enterprise, with the NNPCLtd. holding a 20 per cent stake on behalf of the Federal government.

The NNPCLtd. says it would supply half of the crude required by the plant, and if this is sold at market price, it would be impractical to continue paying subsidies.






     

     

    Checks by The ICIR showed that when Dangote and refurbished NNPCLtd refineries start operating next year as hoped, a freight charge of N24 at the central bank exchange rate and N34 at the parallel market rate would be saved.

    Estimated to produce 55 million litres of refined petrol daily, the refineries are expected to significantly reduce petrol imports.

    An oil sector governance expert, Henry Adigun, told The ICIR how the international price of crude would be a major determinant factor when Nigeria fully deregulates.

    “The oil market is a dollar denominated market and several factors are involved in determining the fuel price.The key factors that determine the price are price of crude, international pumo price and exchange rate. What Nigerians will pay will be determined by international best practices,” Adigun said.

     

    Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

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