THE Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCLtd), Mele Kolo Kyari, said competition and market forces would moderate the price of petrol over time when more marketers come into the business.
The NNPCLtd had on May 31 reviewed petrol pump price upward from old prices of between N185 and N200 per litre to a range of N488 to N557 per litre. The sharp price hike immediately triggered increase in cost of goods and services.
Kyari, who spoke today in a monitored broadcast on Arise Television, said with the removal of fuel subsidy, the market was only regulating the price. He said the same market would prune down prices as more marketers come into the petroleum importation business.
According to him, market determination of the price over time would remove price band, and market forces and realities would moderate prices.
“No more price band; the market will determine price. All marketers are determined to come in now because there is no more subsidy regime.They were reluctant before because there was subsidy. Putting a price band is not a characteristic of a deregulated market.
Kyari further said that petrol price is currently being determined by the international price, in addition to other logistics, freight, and border shipment costs.
He said, “There are the cost of ship-to-ship transfers, cost of haulage, cost of managing trucks from depots, cost of managing the product at filling stations, cost of the marketers, cost of depots owners, and there are numbers around.”
He further said that only the market can stop round-tripping, smuggling and other excesses that have characterised the business over time.
He confirmed that the budget for subsidy for 2023 was not cash-backed, arguing it did not make any sense that the government keeps subsidy as a result of the government’s lack of funds.
“We are observing the Petroleum Industry Act laws and would have exited subsidy in February 2022, but the government in its wisdom then had to keep it. However, it is no longer sustainable. It was budgeted for but not cash-backed,” he said.
Commenting further on whether the NNPCLtd would be an obstacle to the marketers when they come into the competition, Kyari said, “The PIA law requires that we don’t do more than 30 per cent in the market. If we do more than that, it is going to infringe on the anti-competition law.
He explained there would be a single exchange market for everyone as the NNPCLtd would be competing with marketers in the same foreign exchange market as a result of the President’s exchange rate unification declaration.
“As we speak today, NNPCLtd uses the official exchange rate to enable proper stabilisation. However, the NNPCLtd will exit in the official exchange rate market and engage in a single forex market,” he said.
But to an oil industry governance expert, Joe Nwakwue, Nigeria does not have a deregulated market regime yet with the NNPCLtd still the sole importer of refined crude in Nigeria.
“We need to have a diversified supply before removing the subsidy. The NNPCLtd is still the sole importer and we cannot be talking about full deregulation when they are still the one fixing price. Subsidy removal is part of deregulation, and we need to open up the supply and get up to five major independent marketers who can muster the capacity to import. There are still lots of works to be done,” Nwakwue.
In a similar vein, a development economist, Celestine Okeke, that the Tinubu administration needed to release a policy document that would inform Nigerians step by step modalities of the deregulation decision.
Okeke said, “There is need for transparent engagement with Nigerians on how and strategy of the subsidy removal, with a policy document to guide the people. It would enthrone confidence in the process. This would save us from lots of the distress that we are currently being confronted with.”