FG may allow marketers to sell petrol above N145 per litre (Details, pics)

The Federal Government on Tuesday hinted that independent marketers might be allowed to sell petrol above the current regulated pump price N145 per litre. The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, gave the hint in a presentation at an investigative hearing organised by the Senate on the lingering scarcity of the product in the country.

He said the N26 differential between the current pump price and the landing cost of the commodity was caused by the rise in the exchange rate. The minister recalled that naira was 285 to a dollar when the pump price was raised to N145 per litre, adding that the rate would have to drop to N240 to a dollar for marketers to be able to sell at the official price.

Kachikwu stated that the government had come up an 18-month emergency period within which issues affecting supply and pricing of the commodity should be solved.

The minister said the government was considering three models for the regulation of the pump price of petrol, one of which is a “plural pricing system” that would allow independent marketers to either stick with the distribution chain of the government and the official price, or sell the commodity based on the variations in the importation and landing costs. The minister explained that while the government could retain the current official pump price of N145, marketers who were not okay with its supply chain could be allowed to import and distribute the product independently.

Kachikwu said, “We are looking at an 18-month emergency period. During this emergency period, we need to address the issue of pricing. There is price disparity between the landing cost and the cost of selling. If we must sell at N145 (per litre), we need to put mechanisms in place so that the private sector can go back to importation. We now have a committee that is looking at this and it will be subjected to review.

“The landing cost of the product today is about N170 or N171. The price that we should sell is N145. So, there is a disparity. What that means is that those individuals who are bringing in theirs will not be able to meet their obligations like the NNPC for commercial supply. We need to step back.”

The Chairman of the Senate committee, Senator Kabiru Marafa, who interjected Kachikwu at this point, said the minister had stirred the hornets’ net by the statement. He asked, “Are you saying that the N171 is what an average Nigerian will pay at the filling station or what the marketer will lift from the depot or the cost of importation?

”Responding, Kachikwu said, “Our point is that there is a gap and we need to see how we can fill that gap. There are three mechanisms that we are looking at in dealing with that gap. Whatever we do, giving the constraints of the NNPC in handling 100 per cent of the supply, which may become an overriding burden on the corporation, we need to free the marketers to do their business. To do their business is to address the pricing issue.

“To address the pricing issue, we are looking at three models. When we got to N145, the exchange rate was N285 (to a dollar); today, it is at N305. Even at the minimum, there is a gap there. If you walk to the CBN to check the modulation of the exchange rate to sell at N145, the cost of purchasing it today is about N240; it is not N285 or N305.”

Listing the options available to the government to maintain the current pump price, the minister stated that one of the mechanisms being considered was to work with the Central Bank of Nigeria to create a forex policy for marketers to be able to sell at N145.

Another option, he said, was to relax some of the taxes imposed on the marketers in the importation and distribution chain, thereby reducing their running costs. Kachikwu added, “We are also looking at the potential of – going theoretically to respect the N145 pump price – having a plural pricing system. The NNPC and all its stations, about 400 across the country, will sell at N145. At the same time, marketers are able to import the product at their own cost and sell. It will now be for the individual to stay with NNPC or not. It does not affect the Federal Government on what the NNPC is selling.”

A member of the committee, Senator Tayo Alasoadura, who is also Chairman of the Senate Committee on Petroleum Resources (Upstream), asked Kachikwu how the NNPC had been sustaining the pump price.The minister pointed out that unless the pricing problem was resolved, the issues would remain persistent.

“We were told that the landing cost is now high, now at N171. The government had gone out with fanfare that subsidy (on petrol) had been abolished but within a year, we are now talking about a landing cost that is high. Did the government not do its homework properly before arriving at N145 per litre?” he said.

Another member, Senator Bassey Akpan, who is the Chairman of the Senate Committee on Petroleum Resources (Gas), also asked why the minister was considering pricing modulation and if he had the approval of President Muhammadu Buhari to modulate the petrol pump price.