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.