Government contemplates narrow fuel price band for flexibility

Disturbed by the seeming reluctance of petroleum marketers regarding the adjustment of pump price under the monthly pricing template, the Federal Government is to maintain a narrow price band for seamless transition.

Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, dropped the hint during a live programme.
His words: “It is a transition and people are learning how to manage this, and customers are trying to adjust. When we reduce prices, people typically have old stocks that they have bought at old prices, and in any jurisdiction, you allow some of transition to take you to the real market condition. And this is what we are trying to manage.

“This is why we are seeing different prices at stations. Some could adjust to N123.50 because their procurement is of current value.“Ultimately, marketers have indicated interest in importing petroleum products at the regulated price and once they do that, you will see that the band of price will determine the market and the PPPRA will observe and manage the market.”

He added that the decision to end the fuel subsidy regime was in the interest of ordinary Nigerians, as the move would free up funds for government to develop basic infrastructure in the critical sectors of the economy.

Kyari said: “Subsidy is elitist because it is the elite that benefit from it. They are the ones that have SUVs, four, five cars in their garages. The masses should be the ones to benefit. There are many things that are wrong with the under-recovery because it makes us to supply more than is needed. This makes the under-recovery to be bloated because we unwittingly subsidise fuel for the whole of West Africa. That has to stop.”

The GMD explained that the subsidy removal would “automatically correct the distortions it created in the market such as product arbitrage and smuggling,” adding that it would also provide the needed impetus for the NNPC to establish retail outlets in neighbouring countries.

On the agitation in some quarters for a reduction in the price of kerosene, he said the corporation’s focus was rather on how to migrate those still using the product to Liquefied Petroleum Gas (LPG) popularly referred to as cooking gas.

According to him, besides affordability, LPG is safer and more environment-friendly. He said the Minister of State for Petroleum Resources, Timipre Sylva, was championing policies to deepen the adoption of the product for domestic consumption.

On global crude oil price and supply, Kyari said things were shaping up.

“Crude oil price is improving by the day. Last week, it was $15 per barrel. Today (Wednesday), it is $32.79 per barrel. We believe the ongoing engagements between global oil producers will bring back demand and once that happens, the market will balance and fully recover by year-end.”