The Petroleum Product Pricing Regulatory Agency (PPPRA) is yet to update the price of premium Motor Spirit for May as the challenge of Nigeria’s multiple exchange rate kicks in.
Following the restructure in Nigeria’s downstream oil industry through the removal of fuel subsidy amid a slump in crude price, PPPRA said in April that it will ensure monthly review of the price of petrol to reflect market fundamentals.
While PPPRA released the updated petrol price for April on the 1st of last month the regulatory agency said it’s engaging the Central Bank of Nigeria (CBN) to determine the applicable foreign exchange rates for the importation of petroleum products into the country, the likely reason it is yet to give an update for May, almost one week into the new month.
“The agency is engaging the CBN to determine the applicable foreign exchange rates for the importation of petroleum products and modalities for accessing the applicable foreign exchange window by the marketers,” Abdulkadir Saidu, Executive Secretary of the agency said in a statement.
According to the secretary, the rate will be reflected in the pricing template to determine the expected open market price of the product. “This means that going forward, the guiding price to be advised will be determined based on the rates quoted by the CBN,” he said.
The multiple exchange rates and windows in Nigeria have been opposed by analysts as they believe it creates a lot of distortion in prices, hurts businesses, and encourages corruption as it is susceptible to manipulation.
Nigeria’s Federal Government bowed to long-standing pressure to restructure the oil sector and remove subsidy after the country was hit by lower oil prices which have put pressure on its reserves.
The Muhammadu Buhari’s led administration removed the petrol price peg of N145/litre to N125 in March 2020. The first time the price would be adjusted since it was reviewed in 2016, from N86 per litre to N145 by President Buhari on assumption of office.
Petrol price was further reviewed to sell at N123.5 per litre effective April 1, 2020. The 1.2 percent cut was N1.5 less than the previous N125 that was approved by the Government on 19th March 2020.
According to PPPRA the pump price of petrol will henceforth continue to rise or fall with the international price of crude oil.
Meanwhile, the global Brent crude, the benchmark for determining the prices for purchases of crude oil in April was $18.47per barrel while the price was $32.01 per barrel in March of 2020. Over the last twelve months, the price has fallen 74.07 percent
Brent hit a near-21-year low in April as coronavirus outbreak eroded demand and OPEC and other producers ramped up production before reaching the new supply deal that kicked in on Friday.
Brent crude rose above $26 per barrel on Friday, with both benchmarks posting their first weekly gain in four weeks as OPEC and its allies embark on record output cuts to tackle a supply glut due to the coronavirus crisis.
According to data from the Bloomberg terminals, the crude oil price was down 0.61 percent on Monday and old at $26.28 per barrel.
PPPRA said the global crude price is expected to guide the sale of in Nigeria. Adding that the agency planned to extend the same pricing mechanism to DPK (kerosene) and AGO (diesel), among other products.
“The essence of the price band is to ensure price efficiency that will be beneficial to both the consumers and oil marketers,” Saidu said.
