As Nigerians are shocked over the jack up of petrol prices on Monday morning from N540/litre to N617/litre, Group Managing Director of Nigeria National Petroleum Corporation (NNPC) Limited, Mele Kyari has explained that the development is occasioned by market realities as dictated by deregulation of the petroleum sector.
He spoke to journalists at the Presidential Villa shortly after his closed door meeting with Vice-President Kashim Shettima.
Kyari was accompanied by Chief Executive Officer of Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Farouk Ahmed, who further explained that petrol importers are factoring in the current international price of crude oil – at $80 per barrel) as well as freight and distribution costs, hence the pump price hike.
Asked by journalists to explain the price hike, Kyari said “I don’t have the details this moment. We have the marketing wing of our company. They adjust prices depending on the market realities.
“This is really what is happening; this is the meaning of making sure that market regulates itself so that prices will go up and sometimes they will come down also. This is what we have seen and in reality, this is how the market works.”
The NNPCL boss assured Nigerians that there is enough supply of petrol to meet current demand, even for the next one month.
“There is no supply issue completely. When you go to the market, you buy the product; you come to the market you sell it the prevailing market prices. Nothing to do with supply. We don’t have supply issues. There is robust supply. We have over 32 days of supply in the country”, he stated.
Nonetheless, he stressed that “market forces will regulate the market. Prices will go down sometimes; sometimes it will go up. But there will be stability of supply and I’m also assuring Nigerians that this is the best way to go forward so that we can adjust prices when market forces come to play.
“I don’t have the details this moment, but I know that our marketing wing acts just like every other company in this business. I know that a number of companies have imported petroleum products today.
“So, many of them are on line. Market forces have started to play; people have started having confidence in the market. Private sector people are importing products, but there is no way they can recover their cost if they cannot take market reflective cost.”
Giving further insight, Farouk Ahmed added that “the market will determine itself and as you saw back in early June when prices came out, it was based on the cost of importation plus other logistics of distribution and of course the profit margin by the importer.
“This market is deregulated; it is open to all participants. As I mentioned also yesterday when I was in Lagos, we have about 56 marketing companies that applied and obtained licenses to import. Out of those, 10 of them have indicated to supply within the third quarter, which is July, August, September.
“Already, we received some cargoes from these markers: Prudent Energy, AYM Shafa and Emadeb. Emadeb Cargo is arriving tomorrow. So, this is just an encouragement to see that the market is liberated and everyone is free to import so long as you are working within the framework, especially in terms of quality.
“But as to pricing, as a regulator, we are not going to put a cap on the price because we are not part of those importing. We are not a marketing company; we are just a regulator.
“So, when you say market forces are working, basically, what it is that you buy; you consider the price of crude going up.
“A couple of weeks ago, the price of crude was hovering around $70/barrel. Now it’s hovering around $80/barrel. So, the crude price also drives the product price. Because the importers are importing, they are basing it on the cost of importation plus the freight and other cost elements in terms of local distribution.”
