By Tosin Olatokunbo
The current price of petrol of N165 per litre is no longer sustainable amidst the rising global crude oil prices, the Minister of State for Petroleum Resources, Timipre Silva has said. The minister stated this on the heels of disagreement with Labour on the continuous increase in the price of petrol in the country.
Crude oil price has moved from $43 per barrel in the last quarter of last year to at least $60 per barrel in the last few days.
The minister who spoke at the official launch of Nigerian Upstream Cost Optimisation Program on Tuesday, said Nigerians should be prepared to pay more because the government has ended the fuel subsidy regime. Silva’s position, however, contradicts suggestions of experts in the sector that subsidy has not be totally removed.
Silva said: “Since we are optimizing everything, NNPC needs to also think about the optimization of product cost because as we all know oil prices are where they are today, $60. “As desirable as this is, this has serious consequences as well on product prices. So we want to take the pleasure and we should as a country be ready to take the pain.
“Today the NNPC is taking a big hit from this. We all know that there is no provision in the budget for subsidy. “So, somewhere down the line, I believe that the NNPC cannot continue to take this blow. There is no way because there is no provision for it. “As a country, let us take the benefits of the higher crude oil prices and I hope we will also be ready to take a little pain on the side of higher product prices.”
The minister said the government will not fritter the gains from higher crude prices on petroleum subsidy rather the margin would be maximized to provide essential services for Nigerians.
According to sources in the sector, the price of the essential commodity could go as high as N190 and N200 or more, from the current price of N160 –N165 being charged by petroleum marketers in the country. The marketers have complained that the current prices cannot be sustained as crude price continued to rise, pushing up the landing cost of imported petrol closer to the current pump prices of the product in country.
Since November 13, 2020 when the pump prices of PMS were last increased in the country, the price of the international oil benchmark, Brent crude, has increased by 43 per cent, rising from $41.51 per barrel to $59.34 per barrel on Friday.
Petrol marketers had in December expected another upward adjustment of PMS prices to reflect the further rise in crude oil prices, which closed at $51.22 per barrel on December 31. But the government only compounded their woes after the price was slashed by N5 effective December 5, 2020. With the current $60 per barrel, the pump price of petrol should be between N185 and N200 per litre or more, the markers insist.
Crude oil price accounts for a large chunk of the final cost of petrol, and the country has continued to spend so much on petrol imports for many years amid low domestic refining capacity.
The Executive Secretary/Chief Executive Officer, Major Oil Marketers Association of Nigeria, Clement Isong, said, the current price regime is not sustainable if the wants to fully optimize crude oil resources. Therefore, “the pump price should be between N185 and N200 per litre’, he said adding that “for as long as we continue to sell the product at what we are currently selling it, then somebody is bearing the cost of subsidy, and the country really cannot afford subsidy at this time.”
He said total deregulation of the sector is necessary to guarantee supply and stabilise prices.
“So, we need to completely restructure our entire supply chain. We need to reach a place where, if deregulation takes effect, refining will resume in Nigeria. We need to find a way of making sure that Nigerians benefit from deregulation. That, I believe, is what the discussion must be,” he said.
Meanwhile, the government has started discussion with the Nigerian Labour Congress, NLC and TUC on how to raise the freight rate from N7.51 per litre to N9.11 per litre, which experts say will eventually result in further increase of pump price of petrol. Freight is one of the elements that make up the landing cost of the petrol imported into the country.
The National Operation Controller, Independent Petroleum Marketers Association of Nigeria, Mike Osatuyi gives an insight on what Nigerians should expect, in the next few months as crude oil prices continue to rise in the international market.
Osatuyi said, “Already, we are back to subsidy, and from the information I have which is confirmed, the Federal Government is subsidising about N1.8bn per day because 70 million litres are being pumped out every day now because the borders have been opened; I don’t know where the fuel is going.
“Government cannot afford subsidy, and there is no subsidy in the budget. So, the market fundamentals have to come to force now.
“Based on $56 per barrel of crude oil, our pump price should be about N186 to N190. But now that oil price has even gone to $59, then pump price should not be less than N200 per litre. There is no way Nigerians can avoid petrol price increase.”
