The pump price of premium motor spirit otherwise called petrol could rise to about N73.37k per litre if the Federal Government and other stakeholders ratified the open market price of the product as calculated by the Petroleum Products Pricing Regulatory Agency.
On Thursday, the Presidential Steering Committee on the Global Financial Crisis, headed by President Umaru Yar’Adua confirmed that the Federal Government would no longer subsidise the prices of petroleum products in the country.
Government also said it would immediately review the current pricing arrangement to ensure that market forces determined prices of petroleum products.
Going by government’s calculations, every litre of petrol sold in the market today is subsidised by N8.37k at the current pump price of N65 per litre and this it wants to stop.
As a follow up, the Minister of Petroleum, Dr. Rilwan Lukman, and the Minister of State for Petroleum, Mr. Odein Ajumogobia, on Friday met with major marketers and other stakeholders in the industry where the broad guidelines of the full deregulation policy were discussed.
Our correspondent gathered from a major marketer that beyond mere proclamation, the ministers could not give a definite programme on the implementation of the policy. Another meeting was therefore scheduled for next Friday when it is expected that government will have come up with what it believes should be the market price of petrol for the input of stakeholders.
Should government proceed strictly along this line, the pump price of petrol will not only depend on the oscillation of the price of crude oil and petrol at the international market, but also on a number of other costs which arise from government’s inefficiency.
Presently, the PPPRA’s pricing template is a product of many costs. It includes the monthly moving average offshore cost of PMS, which presently stands at N50.90 and the cost of transporting the products to Nigeria. Also added to the mix is the Lithering Expenses which is incurred on the trans-shipment of imported petroleum products from the mother vessel into daughter vessel to allow for the onward movement of the vessel into the Jetty.
The Lightering Expenses also includes the Shuttle vessel’s chartering rates from Offshore Lagos to Lagos and Port Harcourt which currently stands at N2.00 per litre and N2.50 per litre respectively. Trans-shipment (STS) process is as a result of peculiar drought situation and inadequate berthing facilities at the Ports.
There is also the Nigerian Port Authority Charge which is the handling charges charged by the NPA for use of Port facilities. The charge includes VAT and Agency expenses.
Other costs also include Financing, referring to stock finance (cost of fund) for the imported product. It includes the cargo financing based on the International London Inter bank Offered Rates. Also included in the Finance cost is the inertest charge on the subsidy element being awaited for an allowable 60 days period at Nigerian Inter Bank Offered Rate of 22 per cent.
The Jetty Depot Thru Put is also another tariff paid for use of facilities at the Jetty by the marketers to move products to the storage depots. The value is currently N0.80/litre and another charge, Storage Margin which is for depot operations covering storage charges and other services rendered by the depot owners. The charge is currently N3.00/litre.
These costs add up to the landing cost of PMS which currently stands at N60.17k per litre according to PPPRA. Slammed on landing costs is another N13.20k captured as Distribution Margins.
What this means is that petrol may cost N73.37k by the time FG and marketers ratify the price next Friday.
Retailers take N4.60 per litre, while transporters collect N2.75 per litre for their margins. There is N1.75 per litre captured as dealers margin while Bridging Fund plus Marine Transport Average gets N3.95 per litre.
The PPPRA also collects N0.15 per litre as its administrative charge, all summing up to N13.20 per litre on the template as Distribution Margin.
This pricing arrangement may, however, be jettisoned because it accommodates so much inefficiencies and government believes that the operation of the PPPRA has been compromised, and therefore inefficient.