PPPRA Defends Fuel Price

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Farouk Ahmed, executive secretary, PPPRA

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The Petroleum Products Pricing Regulatory Agency has defended the decision of the federal government to peg the price of petrol at N87

By Anayo Ezugwu  |  Feb. 23, 2015 @ 01:00 GMT  |

DESPITE the call by many Nigerians for further reduction in the price of petrol, the Petroleum Products Pricing Regulatory Agency, PPRA, has continued to defend the federal government’s position on the issue. The PPPRA said the federal government provided additional incentive of N3 when it reduced the product’s price by N10 per litre on January 18.

According to the agency, the actual average price which it suggested to the government was N7 on every litre after it monitored the downward movement in global crude oil prices. Farouk Ahmed, executive secretary, PPPRA, said although the country witnessed a period when subsidy on the product was zero and even negative, this had changed based on the fact that crude oil prices had started increasing in the international market.

“The government arrived at the N10 reduction because we monitored the trend in the market. The price of crude peaked on June 18, 2014, and was sold at $114 per barrel and at that time subsidy was about N56 per litre. But the price collapsed to as low as $47 per barrel. And at that point, we in the PPPRA had to advise government because we monitored the progress on the subsidy level. The subsidy level started to shrink from that N56 downward and on December 30, 2014, it came to about 90 kobo per litre. And around the beginning of the year, it switched. Precisely on January 2, it became negative, which means the government was not paying subsidy anymore. We decided to monitor marketers over recovery and we continued to monitor the trend till when it averaged minus N7 per litre, which means the actual price was N90 per litre.

“When we said the price should be reduced to N90 so that it becomes equal to what is obtainable, the government said no, we should continue to monitor. But we explained that we have monitored the trend and it had sustained itself to an average of N7 per litre. And it was at that point, actually on Friday, January 16, that we advised government and on Sunday, January 18, the government announced that instead of N7 per litre, let’s give Nigerians additional incentive to make it N10 per litre,” he said.

Ahmed said the situation had, however, changed, stressing that the price of crude oil had started increasing in the global market and this had created room for subsidy on petrol. “But if you look at what is happening today, you will realise that it (crude price) has switched now. The price is now going up, from as low as $47, it has moved to $56 per barrel as of January 5. That means government is now paying subsidy of about N11 at the close of that day. So if anybody were to load a cargo to bring into Nigeria on that day which will get into the country in the next 35 or 40 days, the government will pay him about N11 as subsidy.”

On what would be the price of crude oil for it to eradicate subsidy completely, he said, “That was when we got to about $50 per barrel and that happened around December 30 when it switched and the cost of subsidy at this point became zero.”

Despite his explanations, the Nigeria Labour Congress, NLC, at its delegate’s conference in Abuja, said the fuel price reduction was not enough. A statement by Peter Ozo-Eson, secretary general, NLC, said the N10 price slash in fuel pump price translates to 10.3 percent reduction compared to 33 percent price reduction in most countries. The NLC said it is important for the regulatory agencies in the downstream sector to protect Nigerians from exploitations. “Given the realities of the international oil market today, there is no reason for maintaining the price of diesel at N160 per litre,” he said.

Ozo-Eson said the Nigerian government had substantially devalued the Naira prior to the price reduction. This he said ensures that the full benefits of falling crude price are not passed on to Nigerians. He called on the government to effect a price reduction through a sustained drop of the crude oil price in the international market, so that citizens could benefit from the reduction.

While commending the federal government, Ozo-Eson said the congress had expected a reduction that would operate within the institutional framework of PPPRA. He said it was unfortunate that PPPRA had been side-lined for long, demanding its board be constituted immediately to enable it discharges its statutory functions. “Accordingly, it is the PPPRA (on whose board we have NLC, TUC, NUPENG, PENGASSAN, NURTW) relying on the existing price template that could arrive at a fair and just price reduction. In order words, the reduction by the government, as welcome as it is, is by fiat.”

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