The importation of Premium Motor Spirit (PMS) into Nigeria is to gulp extra cost of over N2.369 billion per day from Federal Government and marketers as the landing cost for fuel has soared to N212.7 per litre.
This came as oil prices hit their highest levels since July 2015 with Brent reaching $58.37 and $55.24, before paring gains on the strong dollar.
Buoyed by this, the Federal Government, checks by New Telegraph showed yesterday, is already mulling total deregulation of the downstream sector.
While the modulated bracket of N135-N145 is given as official price for fuel, checks showed that extra N67.7 is incurred on over 35 million litres daily imports as the landing cost soared to N212.7 per litre.
Head of Energy Research at Ecobank, Dolapo Oni, stated that the landing cost for PMS was N165 per litre for a $52 per barrel price.
“When oil price was at $52 dollars per barrel, the landing cost was N165 per barrel, later when it was $55, the price soared to N210 per litre,” the financial analyst said.
Now that it is $58 per barrel, the landing cost hovers around N213 per litre, checks by New Telegraph showed.
The Central Bank of Nigeria (CBN) had earlier asked banks to submit bids for a “special currency auction” to clear the backlog of matured outstanding dollar obligations for petrol importers and selected sectors of the economy.
The Petroleum Products Pricing Regulatory Agency (PPPRA), an agency saddled with pricing regulation, has taken down its website, keeping the public in the dark on change in pricing template for petroleum product.
Spokesperson for the agency, Lanre Oladele, could not be reached for comments. His mobile phone was not available while SMS sent was not replied.
The PPPRA website, however, showed default webpage, which read: “SORRY! If you are the owner of this website, please contact your hosting provider: webmaster@ pppra.gov.ng. “It is possible you have reached this page because: The IP address has changed. There has been a server misconfiguration.
The site may have moved to a different server.” Earlier estimates from the PPPRA showed that the country needs an average of $500 million every month to import refined petroleum products, since all of its three refineries are currently producing at less than 25 per cent of their installed capacity.
The price of PMS could surge to over N220 per litre if the new realities of the oil market are taken into consideration.
The oil prices turned negative after earlier hitting 18-month highs yesterday, the first trading day of 2017, as the dollar rallied to its highest since 2002.
Traders said crude prices were buoyed earlier in the day by hopes that a deal between OPEC and other big oil exporters to cut production, which started on Sunday, would drain a global supply glut.
Brent futures were down 95 cents or 1.7 per cent at $55.87 a barrel by 12:05 p.m. EST. U.S. West Texas Intermediate (WTI) crude fell 95 cents or 1.8 per cent to $52.77 per barrel. Earlier in the session, both oil contracts hit their highest levels since July 2015 with Brent reaching $58.37 and $55.24, before paring gains on strong dollar.
“The dollar strength is certainly weighing on oil prices,” said Andrew Lipow, President of energy consulting firm, Lipow Oil Associates in Houston, noting U.S. stock markets also pared their gains from earlier in the day with the dollar rally.
Meanwhile, Minister of State for Petroleum Resources, Ibe Kachikwu, confirmed in a paper presented at a forum in Lagos penultimate week that the Federal Government had a goal to deregulate the downstream sector of the petroleum industry.
Though the government, Kachikwu said, was not there yet, he added that it would continue to fine tune the process until the goal is achieved.
“At every given time in the history of every country, you will always have partial deregulation. The reason being that you have to catch up each time and make an amendment, and even if it is just one day, you might have some level of subsidy for that one or two days before it is removed.
“What is important is the goalpost; where are we headed? Where we are headed is to try and free the industry, so that it makes do with its own rules, set its own prices itself. There are few mechanics that we still need to get in place properly.
We can’t forget the fact that we still have foreign exchange challenges and that income to government is still very tight.
“You still have to find a way to balance that. But what is important is what the objective is.
The objective is still to fully deregulate to find private capital to get them to where they should be,” the minister said.
Corroborating Kachikwu’s view, a former Executive Secretary of the PPPRA, Reginald Stanley, emphasised the need for quick deregulation of the sub-sector.
It is imperative, he said, to establish and empower a strong independent regulator to oversee activities in the sub-sector and ensure the implementation of open and transparent rules for the downstream value chain.