The government pays N1.1b daily on local consumption
The increase in the price of crude oil on the international market has pushed the price of the landing cost of the Premium Motor Spirit (PMS) to 160 N per liter.
The Guardian learned yesterday in Abuja that while the cost of landing was N160 yesterday (Thursday) morning, the open market price also jumped to N183 per liter.
The free market price is the expected price at pumping stations. The additional N23 is the component of the Petroleum Price Regulatory Agency (PPPRA) pricing model.
With the payment of an additional N 23 as contained in the PPPRA pricing model and a national consumption figure of approximately 50 million liters per day, the federal government now compensates approximately N 1.1 billion on the daily consumption of gasoline in the country if the situation remains the same in the future.
At the same time, a source in the petroleum industry called for the creation of a special account at the Central Bank of Nigeria (CBN) for the import of petroleum products.
He argued that such a special fund would make foreign exchange readily available to traders who wish to import the product, which is a smart move to break the state monopoly that the Nigerian National Petroleum Corporation (NNPC) has assumed.
He declared: “The creation of this special fund will allow the NNPC to no longer get bogged down in importing petroleum products which is not its core business. There are some very serious businesses that society should get involved in that can benefit Nigeria as a country more than importing products, which the private sector is best able to do. The NNPC engaging in importing oil is not without some devious practices that drain the country.
“The time has come for the NNPC itself to pressure itself to withdraw from oil import activities in order to increase efficiency in its core areas of activity. Creating a special fund will encourage more traders to join in and this will likely lead to a reduction in the price at the pump. “
Indeed, from August 2020, there was a Federal Gazette which prohibited the PPPRA from interfering in the prices of petroleum products. However, the gazette indicated the role of PPPRA to include intervention when the agency finds prices too high and unjustifiable.
This scenario presents where all operators, including traders, are able to defend their prices in a clear manner to avoid PPPRA sanctions.
PPPRA’s PMS pricing consists of two parts. The first part is the cost of the product / import (cost, insurance and freight) and the second aspect is the local distribution margins (distribution cost and return on investment).
Product cost is the cost of a metric ton of petroleum product in US dollars, as listed on Platts (S&P Global Platts). Freight is the average cost of transporting (30 kt) of goods from Northwest Europe (ENO) to West Africa (WAF).
Relief is the local ship-to-ship freight incurred in the transshipment of imported petroleum products from the parent ship to the daughter ship to allow for subsequent movement of the ship to the jetty.
The Nigerian Port Authority (NPA) charges a freight charge (port handling charge) for the use of its port facilities, while the Nigerian Maritime Administration and Safety Agency (NIMASA) charges for prevention and the control of marine pollution and the application of cabotage.
The pier debit charge refers to the tariff paid for the use of the facilities at the pier by traders to move products from the jetties to the storage depots. Storage charges relate to depot operations covering storage costs and other services rendered by the owners of the depot.
Financing refers to the financing of the stock (cost of the fund) for the imported product. It includes freight financing based on 25 percent of the landing cost details of distribution margins on the PPPRA pricing model. These include the transport allowance (NTA), which involves the contribution / reimbursement of the fund to cover the cost of local transport of petroleum products in the same area.
Local delivery is based on a transport differential zone map and the retailer is the allowable margin of petroleum product retailers after taking into account overhead and other running costs, while wholesale refers to the admissible margin of importers of petroleum products after taking into account overheads and other operating costs and administration costs return to the PPPRA in payment of its interventions.