The pump price of petrol has dropped to N65 per litre as the Federal Government on Thursday bowed to pressure to reduce the cost in line with falling global crude prices.
The reduction, which is based on new “price adjustment mechanism” effectively signals the deregulation of petrol prices.
A litre of petrol had remained at N70 since June 2007 in spite of wide swings in crude prices, which peaked at N147 in July 2008 but had since dropped below $35 in recent weeks.
Nigeria currently imports about 90 per cent of the 18 million litres of petrol consumed daily, while about 10 per cent is produced by its four refineries.
The reduction in the pump price is contained in a statement issued on Thursday by the Petroleum Products Pricing Regulatory Agency.
The statement reads: “Following the downward trend in the prices of crude and refined petroleum products at the international market, a development that has brought the open market pump price of premium motor spirit (petrol) below the current price of N70.
“The PPPRA has decided to substitute the fixed price with a recommended price in order to pass on the benefit of this drop in price to the Nigerian public.
“In this regard, it is recommended that all petroleum marketers take a cue on the open market reference price level for petrol – the average for the one-month period specified – from the PPPRA’s posted price on its website or as published in the national dailies.”
It added that based on current market fundamentals, the indicative open market pump price of petrol for the month of January is N65.
The agency therefore directed “all petroleum marketers to comply with this price immediately.”
It also stated that the indicative price of petrol would be published on its website and in the press on a monthly basis using its automatic price adjustment mechanism.
It added that it would continue to liaise with the Department of Petroleum Resources to ensure that petroleum marketers do not engage in profiteering by selling above the upper limit of the open market price monitored by the agency.
Reacting, the Executive Secretary of the Major Marketers Association of Nigeria, Mr. Obafemi Olawore, said the association’s members would implement the decision immediately.
Olawore said, “We will obey immediately, although we are still in a meeting with PPPRA.
“We were summoned to the meeting this evening and after the meeting, we will notify all the chief executives (of oil marketing companies) to comply immediately. But we cannot say for now what this portends until after the meeting.”
Market observers believe that the development could trigger further competition among oil downstream players as marketers with superior efficiency in financing import and distribution logistics could even sell below the recommended price.
However, a substantial recovery in the oil market could also mean that petrol prices might easily rise above the N70 mark.
The deregulation of the downstream sector started in September 2003, after a prolonged negotiation with the organised labour, which described the move as “anti-people.”
Because of the resistance by labour, government opted to start with a partial deregulation of diesel and kerosene prices. But petrol remained regulated.
After many complaints, kerosene was taken off the deregulated list in 2006 by former President Olusegun Obasanjo. It started selling at a controlled price of N50 per litre.
Road transport operators welcomed the reduction in pump prices, saying that transport fares could come down slightly.
President, Road Transport Employers Association of Nigeria, Mr. Femi Ajewole, who gave the hint, urged the Federal Government to channel the fund that would have been used for fuel subsidy to road projects.
Speaking in a telephone interview with one of our correspondents, the union leader said he was optimistic that the cost of fuel would still come down further.
He said, “If a litre of petrol can drop from N70 to N40 or N30, commuters should also expect drastic fall in transport fares.
“This will also be to our advantage. With lower fare, more people will now travel in our cars and buses.”
Although he noted that the government claimed to have spent so much to ensure that the products were sold at uniform prices at all filling stations across the country, motorists were still paying more than the approved prices in some states.
“If full deregulation will ensure sanity in the distribution of petroleum products, and proper services in terms of good roads, so be it,” he said.
He added, “My concern is also on the poor conditions of the roads. This will be an opportunity for the government to address the problem squarely by redirecting the money for fuel subsidy as road fund.
“The bad roads are damaging our vehicles and the spare parts for the vehicles are either expensive or unavailable.”
Meanwhile, there has been a sharp drop in the international projection of Nigeria‘s oil revenue in the last one year, a United States-based government news agency, Empowered Newswire, reported that the latest OPEC revenue fact sheet released by the US Energy Information Administration indicated that while projected oil export revenue for Nigeria in 2008 was $70bn, the real figures came in far lower at $57bn.
Regarding per capita revenues, the report noted a slight decline from $506 at the end of 2007 to $409 at the end of 2008.
It said that Angola and Algeria had better per capita figures than Nigeria. At the end of 2008, Algeria‘s per capita based on its oil revenue was $1, 686, while Angola came in even higher at $4,399.
But the trend affects all the OPEC countries, including Saudi Arabia whose projection for 2007 was $288bn but $233bn in 2008.
The EIA noted that the entire OPEC countries net revenue projection for 2008 was $972bn but ended up at $786bn.
These declining figures were attributable to the current international oil market situation that has led to a sharp drop in the price of oil. Besides, the report also sets a less buoyant projection of oil revenue for the OPEC nations going forward.
For instance, the US agency said OPEC nations, based on current international energy outlook, could earn as low as $387bn on net oil export in 2009.
But the figure could also go up to $526bn projected for 2010.
Yet, next year‘s projection is still lower than the $972bn in OPEC net oil revenue in 2007.
The EIA said ”last year OPEC earned $972bn in net oil export revenues, a 42 per cent increase from 2007.
“Saudi Arabia earned the largest share of these earning-ie 2007-with $288bn, representing 30 per cent of total OPEC revenues.”
The report said further that ”on a per capita basis, OPEC net oil export earning reached $2691, a 40 per cent increase from 2007.”