PPPRA to unveil new fuel pricing template Jan 1

Agency allocates first quarter petrol
import
THE Petroleum Products Pricing
Regulatory Agency (PPPRA) will release
the new petroleum products pricing
template on January 1, 2016, the
Executive Secretary of the agency,
Ahmed Farouk, has said.
In an interview with The Guardian in
Abuja yesterday, Ahmed, who disclosed
that Minister of State for Petroleum
Resources, Dr. Ibe Kachikwu, had
approved the template, explained that
the list of petroleum marketers that
would import products into the country
in the first quarter of 2016 would soon
be released.
He hinted that the intention of the new
template is to eliminate exposure
without increasing pump price.
The PPPRA boss added: “To achieve this,
the PPPRA will leverage on the current
market structure as well as a review of
the existing PPPRA pricing template with
the objective of making the components
dynamic and responsive to the dictates
of the international oil market. This will
further ensure efficiency of products
delivery at realistic costs to the
consumer.”
Farouk noted that the last real structural
change to the template was done in
2007, which necessitates another review
to align it with the current market
realities.
He said President Muhammadu Buhari’s
directive for review of the pricing
template would ensure it is no longer
static but dynamic and market-driven.
“Government’s intention to review the
template is not to discourage investment
in the sector, rather, it is meant to
increase discipline and efficiency in line
with best global practice. Therefore,
there will still be incentives to the
stakeholders to keep importing, but not
to the detriments of the consumer,” he
said.
Farouk revealed that the PPPRA would
review the landing cost, traders’ margin,
and demurrage costs, among others, in
the new template, saying “we believe a
lot of efficiency can be instilled in
there.”
The PPPRA scribe also said government
has approved a downward review of the
bridging costs and effected a slight
increase in the retailer and dealers
margin to encourage investment in the
retail sub-sector, adding that the steps
would lead to a net reduction in the
subsidy level.
His words: “In the new template, the
PPPRA will take practical step to
encourage investment in the retail sub-
sector.
We will go out to encourage investments
by oil majors operating in the retail
outlets not just in the major cities, but in
the rural areas. The only way to achieve
this is to offer incentives.
So, we are looking at retailer margin
effect, a slight increase in it so that we
can encourage investment in that area.
Having private depots alone will not
help the system, but investment in the
retail outlets will further enhance
distribution chain.”
According to him, the resumption of
production by the Kaduna and Port
Harcourt refineries would reduce the
cost of subsidy in the short term. “The
coming on stream of both the Kaduna
and Port Harcourt refineries will impact
positively on availability of fuel and
reduce subsidy costs as some components
of the pricing template such as freight
cost, traders margin, lightering expenses
and financing cost are exempted from
locally-refined products subsidy claims.
Therefore, there is almost N10 difference
between the imported fuel and the
locally refined product,” he explained.
On his part, the Group General Manager
(GGM), Corporate, Planning and
Strategy, Bello Rabiu, said the Minister
of State for Petroleum Resources was
misquoted as saying petrol would be sold
at N85 per litre from January 1, 2016.
“As at the time the minister spoke, the
open market cost of petrol importation
into Nigeria came down to about N85
per litre. The open market price consists
three elements namely: the price of
bringing the product into Nigeria, ship
to ship transfer and storage cost within
Nigeria and distribution costs to
retailers, transporters and dealers at the
filling stations.
The totality of the costs was N85. This
means that at that material time, the
amount Nigerians should pay at the
pump should be N85 per litre. This is
exactly what happened. The price of
petrol will change based on the price of
gasoline in the international market,
cost of freight as well as the cost of
distribution within the country.”
He further stressed that since
government does not control the market,
it will strive to boost efficiency of the
system that will ultimately result in
buying petrol as close to the market
price as possible.
He said government intended to access
the refineries to see what is needed to
improve their capacity. “ This is because
we need more energy capacities as a
nation. The rehabilitation of the
refineries, which would be done in
conjunction with the private sector, will
result in reducing inefficiency in the
system. The Nigerian National Petroleum
Corporation (NNPC) will be allowed to
work with the private sector to bring the
needed efficiency to the refineries. Once
this is done, Nigerians will begin to see
the refineries working for about 300
days in a year, refineries will be
maintained as at when due and
competing with other international
refineries around the world.”