The account
of the Nigerian National Petroleum Corporation (NNPC) is increasingly
over-burdened as the landing cost of Premium Motor Spirit (PMS), otherwise
called
petrol, has risen following the recent surge in global oil price,
analysts have said.
The price of crude oil hit more than three-year high at the
beginning of last week rising to $70 per barrel for the first time since
December 2014.
The Nigerian
National Petroleum Corporation (NNPC) had in December 2017 hinted that Cost,
Insurance and Freight (CIF) price of PMS was $620 per metric tonne, and that at
N305 to a dollar, PMS landing cost translated to N171 per litre. At that time,
oil price traded below $65 per barrel.
But analysts
estimate that with the recent rise in oil price and based on the Petroleum
Product Pricing Regulatory Authority (PPPRA) template, the cost of imported
petrol now hovers at between N175-N180/per litre.
“You will agree with me that today, based on
my own estimate, the naira landing cost of petrol in Nigeria is actually
somewhere between N175-N180/per litre which means that if the government should
fully deregulate the oil sector, there would be higher price for petroleum
product,” the Head, Investor Relations at United Bank for Africa (UBA) Mr.
Abiola Razaq, said.
“If you look at the PPPRA template and where
crude oil prices are in addition to shipping cost and using the official CBN
exchange rate, you would have an idea of what the cost of refined products is,”
Razaq also said.
He said that anytime oil price went up, the
naira landing cost of petroleum products also increased.
“It is a fact that PMS prices will go up and
the fact that our refineries are not functioning means we are vulnerable to
shocks,” the Head of Energy Research at Ecobank, Mr. Dolapo Oni, said about the
impact of a jump in oil price on petroleum products.
The Chief Executive Officer (CEO) of the
International Institute for Petroleum, Energy Law and Policy (IIPELP), Dr.
Timothy Okon, said it was not unusual for PMS prices to escalate when oil
prices rise.
“Of course, 80 per cent of PMS price is crude
price. If prices go up product prices must reflect the price of crude,” Dr.
Okon a former head of Corporate Planning and Strategy at the NNPC, said.
Daily Trust reports that at the landing cost
of N171 per litre, NNPC recorded under-recovery of N26 on a litre of the
commodity. However, with prices hovering between N175-N180, according to
industry experts’ prediction, N33 is being spent on every litre of petrol by
the corporation to keep the pump price at N145.
The NNPC
while clarifying a statement wrongly attributed to Managing Director of
Petroleum Products Marketing Company (PPMC), Mr. Umar Ajiya at the weekend
explained that there was under-recovery in the importation and sale of PMS by
NNPC, but the burden is categorized as business losses which the Act
establishing NNPC recognizes.
Mr. Ajiya,
according to NNPC, had made it explicitly clear that the losses from the PMS
imports by NNPC could not be classified as subsidy since it was not
appropriated for by the National Assembly.
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