File Photo: Why the fuel price went up
Here are some of the questions Nigerians are asking on the new petrol price. And here are the answers
1. What is the benefit of the new price regime to
Nigerians?
.a End fuel scarcity by ensuring availability of products at all
locations of the country
b. Reduce hoarding, smuggling and diversion substantially and stabilise price at the actual product price
c. Ensures market stability and improves fuel supply situation through private sector participation
d. Creates Labour market stability (will potentially create additional 200,000 jobs through new investments in refineries and retails and prevent potential loss of nearly 400,000 jobs in existing investments).
2. Why the new price regime?
The rise in crude oil price and high cost of importation has brought back subsidy regime (at the price of N86.50). Due to decline in government income related to crude oil and output caused by vandalism in the Niger Delta, there is neither funding nor appropriation to cover this in the 2016 Budget.
3. What is the difference between this new price regime and previous price reviews?
All stakeholders including marketing companies and independent experts were consulted in arriving at the appropriate cost reflective regime. This is in furtherance of the Price modulation on framework rolled out in January 2016
which entails modulating prices down or up on a periodic basis
to reflect actual prevailing costs.
4. Is this new price regime a deregulation?
While the Federal Government is not deregulating, this new
price regime will ensure that the price of products are
monitored to ensure that citizen get a fair value for products
they purchase.
5. What is the real cost of PMS to the Nigerian consumer?
The estimated “true” cost of PMS was valued to be 243.05NGN per litre. This is factoring the estimated average me spent to obtain PMS at the official price (86.50NGN), the estimated hourly wage of the average Nigerian, the average price of PMS on the black market and the estimated average volume bought per visit to the filling stations.
6. Why do we have scarcity?
There is no foreign currency and ways to open a new line of credit to bring in more products. This has imposed over 90% supply on NNPC since October 2015 in contrast to the past where NNPC supplies ~48% of the national requirement. NNPC does not have the resources for and is not designed to
meet this increase in supply, this has resulted in the current fuel
situation across the country.
7. Will the new price regime ensure availability of petroleum products?
The new price regime will allow Marketers source their foreign
exchange independently of CBN and ensure product supply in
all locations of the country.
8. Will the new price regime positively impact the economy?
Clearly the continuation of subsidies in any form for PMS limits
the ability of Government to deliver its statutory functions such
as power generation, security, education, health etc. The new
price regime will enable government focus on these critical
sectors and free up our scarce foreign exchange to be used in
other sectors.
9. What happens to the subsidy provision in the 2016 budget?
There is no provision for subsidy in the 2016 budget
10. Why should Nigerians not enjoy low petroleum prices as the nation is a Major Oil Producer?
Crude oil price is an internationally traded commodity, the
prices are not set by the countries that produce it. Neither do
oil producing countries get a discount in the international
market for producing this product. Furthermore, crude oil price
accounts for about 80% of the final cost of fuel. Other costs
include depot charges, transportation costs, chemicals, spare
parts, raw materials etc are related to host of economic factors.
Therefore, at the current crude oil price of $40 per barrel, the
finished domestic refined fuel sold to Nigerians cannot be
priced lower than the cost of the crude.
11. How would the Government ensure that Petroleum Marketers sell within the price range?
The relevant regulatory institutions (DPR, PPPRA) will be further
empowered to ensure level playing ground, strict compliance with market rules by all stakeholders and consumer protection.
12. How does petrol price in Nigeria compare with those of
other countries?
Even with the new price regime, Nigeria would remain one of
the cheapest fuel markets in Africa and this could even be
lower once competition takes effect. Likelihood of smuggling to
neighbouring countries will also be significantly reduced with
the new price regime.
13. When do we stop petroleum products importation?
Nigeria will only stop product importation when it attains local
production sufficiency. The present administration is working assiduously on key initiatives towards boosting our local refining capacity.
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13 Frequently Asked Questions on new petrol price
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