Petrol price determined by market forces – PPPRA boss

The Petroleum Products Pricing Regulatory Agency (PPPRA), Abdulkadir Saidu has again insisted that the agency does not fix the price of petrol but merely provides a guiding price band within which the operators are expected to operate.

Saidu in a statement in Abuja explained that the price of petrol is determined by market forces with 80 percent of the cost due to the price of crude oil in the international.

This, he said, means that petrol price will increase or decrease in line with the price of crude oil.

According to him, “the price guide takes into account prevailing market conditions by monitoring petroleum products prices daily, using the average price of the previous month and other components like foreign exchange rates to determine prices for the following month, while ensuring reasonable returns to Oil Marketing Companies (OMCs)”.

He noted that “under the market-based pricing regime, products prices will be determined by market forces. This explains the recent downward and upward movements in the guiding pump price band of PMS, which reflects market realities.

“It is important to note that applicable Petroleum Products Cost accounts for about 80 per cent of the pump price of petroleum products. Correspondingly, if the price of crude oil is low, it stands to reason that pump prices will come down and similarly, when prices increase, pump price will be expected to go up reflecting market trends.

“In the same vein, Foreign Exchange (Forex) rates also play a significant role in determining the guiding pump price of petroleum products. Forex availability to importers is very essential in enabling marketers procure the products and sell at Expected Open Market Price (EOMP). To this end, the Agency is engaging with the Central Bank of Nigeria (CBN) to ensure availability of the required Forex for the importation of petroleum products and the modality for marketers to access Forex at the applicable window”, he stated.

Saidu stressed that the agency would ensure that participants in the downstream sector operate within acceptable limits and protect consumers amongst others.

“The Agency is cognizant of the public outcry trailing the recent surge in petroleum products prices. However, this decision is a reflection of the new market-based pricing system, which does not seek to harm consumers but foster growth in the sector and prevent wastages resulting from subsidy”, he added.

On effort aimed at reviving investment inflow in the downstream sector, he said: “Since the commencement of the new price regime which heralds full deregulation of the sector, a considerable increase in the level of OMCs’ participation in PMS importation has been recorded. In recent years, OMCs withdrew from product importation, but since the Federal Government’s pronouncement on 19th March 2020, over 536,000 metric tons of PMS have been directly imported by the OMCs.

“Additional investment in local refining is gaining traction and is expected to engender more competitive pricing. The Dangote Refinery with a refining capacity of 650,000 barrels per day will certainly impact positively on the price of PMS in the market when it commences operations in 2022. We expect to see more investment in modular and conventional domestic refining going forward”.