Nigeria’s main oil company NNPC Ltd says it increased the price of petrol Tuesday in response to “market realities”, implying higher costs of crude oil and shipping more than a month after the government scrapped petrol subsidy.
Filling stations owned by the Nigerian National Petroleum Corporation (NNPC) in the capital Abuja sold petrol for N617 a litre on Tuesday, above the previous rate of N537.
It is the second increase of petrol pump price since President Bola Tinubu took office on May 29 and scrapped petrol subsidy that helped put the price at N185 a litre.
CEO Mele Kyari and Farouk Ahmed, chief executive officer of the regulatory body, Nigerian Midstream and Downstream Petroleum Regulatory Authority, commented on the development after a meeting at the presidency.
– Key quotes to note
“This is really what is happening: this is the meaning of making sure that the market regulates itself so that prices will go up and sometimes they will come down also. This is what we have seen and in reality this is what the market works,” Mr Kyari told journalists.
“What I know is that the market forces will regulate the market. Prices will go down sometimes; sometimes it will go up. But there will be stability of supply and I’m also assuring Nigerians that this is the best way to go forward so that we can adjust prices when market forces come to play.
“I don’t have the details this moment, but I know that our marketing wing acts just like every other company in this business. I know that a number of companies have imported petroleum products today. So, many of them are on line. I’m sure my colleague would confirm this. Market forces have started to play; people have started having confidence in the market. Private sector people are importing products, but there is no way they can recover their cost if they cannot take market reflective cost.”
He said the price shift had nothing to do with supply as the country had enough for the next 32 days.
Mr Ahmed said “as a regulator, I told you back in May that we are not going to be setting price. The market will determine itself and as you saw back in early June when prices came out, it was based on the cost of importation plus other logistics of distribution and of course the profit margin by the importer. This market is deregulated; it is open to all participants.
“As I mentioned also yesterday when I was in Lagos, we have about 56 marketing companies that applied and obtained licenses to import. Out of those, 10 of them have indicated to supply within the third quarter, which is July, August, September. Already, we received some cargoes from these markers: Prudent Energy, AYM Shafa and Emadeb. Emadeb Cargo is arriving tomorrow.
“So, this is just an encouragement to see that the market is liberated and everyone is free to import so long as you are working within the framework, especially in terms of quality. But to pricing, as a regulator, we are not going to put a cap on the price because we are not part of those importing. We are not a marketing company; we are just a regulator.
“So, when you say market forces are working, basically, what it is that you buy; you consider the price of crude going up. A couple of weeks ago, the price of crude was hovering around $70/barrel. Now it’s hovering around $80/barrel. So, the crude price also drives the product price. You know, because the importers are importing, they are basing it on the cost of importation plus the freight and other cost elements in terms of local distribution.”
– Learn more about the impact of high prices
The removal of subsidy pushed the price of petrol, widely used to power offices, homes and cars in Nigeria, up by nearly 200%.
On Monday, the National Bureau of Statistics said Nigeria recorded its highest monthly inflation rate in seven years in June, following subsidy removal and the devaluation of naira.
Prices of goods and services rose 2.1% in June compared to May, the most since May 2016.
Annual inflation accelerated 22.8% from 22.4% in May – the highest in 17 years. Food inflation was 25.25% from 24.82% in May.
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