NNPC’s Controversial Petrol Price Crash Claims
Chineme Okafor looks at the recent declaration of a petrol price crash by the Nigerian National Petroleum Corporation, which is widely seen as controversial
In a statement recently in Abuja by Group General Manager, Public Affairs Division, Nigerian National Petroleum Corporation, Mr. Ndu Ughamadu, the corporation made glowing disclosures regarding a decrease in the price of premium motor spirit and gas. The revelation that NNPC had crashed the prices of petrol and domestic gas used in the country was, undoubtedly, good news to the ears of Nigerians.
According to the NNPC, the pump price of petrol, which was N145 per litre, had fallen to between N142 and N143 in stations across the country, while the prices of 12.5 and five kilogrammes of cooking gas fell to between N3, 800 and N2, 000, respectively.
The corporation equally disclosed that at its inland products depots and those of other private concerns, the ex-depot prices of petrol had dropped from N138 to between N130 and N131 per litre, indicating that it was making steady progress in its strategic intervention on efficient supply and distribution of petroleum products.
Oil and Gas Forum
Basing its conclusions on a national survey conducted by its weekly television programme, the Oil and Gas Forum, NNPC stated that the pump price of petrol had fallen steadily in the last few weeks, from N145 per litre to between N142 and N143 per litre in some stations across the country. It explained that in its study, its mega and affiliate stations were selling petrol for N143 per litre, while some major and independent marketers in Lagos, Abuja, Sokoto, Enugu, Delta and other major cities in the country sold between N142 and N145 per litre.
Quoting a respondent in the survey, Mohammed Abdullahi, who it said was a manager at an independent fuel service station in Abuja, NNPC noted that the station had maintained a N142 per litre price level. It said Abdullahi’s station opted to adopt the price policy because of the prevailing market situation, which demanded that it looked for ways to sustain its turnover by keeping an attractive price band.
Similarly, another independent marketer, Emeka Ikechukwu, was quoted in the statement to have told the NNPC survey that at Mosimi, in Ogun State, ex-depot prices of petrol had dropped from N138 per litre to N133.28 in NNPC depots and between N130 and N131 per litre at private depots.
But, it reported that Aba and Umuahia in Abia, as well as Calabar in Cross River states, had most independent fuel stations and major marketers selling petrol at N145 per litre.
Equally, the corporation’s survey showed that the average price for cooking gas at filling plants across the country had dropped from N2, 500 for 5kg cylinder, to between N2 000 and N2, 215.96, while that of 12.5kg was N3, 500.
NNPC’s Explanations for Price Crash
Providing an explanation for the price decline it said the country recorded, the NNPC stated that it had ensured its interventions in the downstream sector through sustained improvement in the supply of products and remodelling of distribution channels to address issues of products sufficiency across the country. It also noted that it stepped up the resuscitation of some of its critical pipelines and depots, such as the Atlas Cove to Mosimi Depot Pipeline; Port-Harcourt Refinery to Aba Depot Pipeline; Kaduna to Kano Pipeline; as well as its Kano Depot, all of which it said had enhanced efficiency in products distribution in the country.
To sustain this, the corporation said efforts were also being made to revamp and re-commission other critical pipelines and depots across the country. But it never disclosed the economic details of the price crash, thus, raising concerns about the sustainability of the price crash.
Controversy
NNPC did not state exactly when it conducted the survey on the price decline or the research tools it employed. It only stated that it was done a couple of weeks ago. But a July 2017 PMS Watch of the National Bureau of Statistics, an agency of the federal government saddled with the job of researching, documenting and providing accurate national statistics for planning and policy purposes, stated that in July the average price paid by consumers for a litre of petrol was N148.2, with Yobe, Borno, and Adamawa paying the highest of about N170 per litre.
The NBS report also noted that on the average, petrol was sold in July in Bauchi, Ogun, Cross River and Ekiti, among others, at N145.4 per litre.
In preparing its report, the NBS stated that field work was done by 700 of its staff in all the states of the federation, supported by supervisors who were monitored by external and internal auditors. It also noted that fuel prices were collated from about 10,000 respondents in the 774 local government areas, including the Federal Capital Territory, adding that the instruments represented the actual expenditures of household on petrol, as well as suppliers’ price margins.
Similarly, oil industry experts who provided some explanations on the likely scenario for such price drop stated that the global market fundamentals on downstream operations were quite incongruent with the corporation’s report of a steady pump price slump.
Providing an independent evaluation of these claims, Mr. Dan Kunle, an expert in global oil industry economics, told THISDAY that without clear economic explanations on the price drop, it would be quite difficult to accept the corporation’s claims. Kunle, in a telephone conversation explained that while the prices of crude oil hovered around the $50 per barrel band does not necessarily guarantee a decline in pump prices of petrol because the country still relied heavily on imported gasoline.
He, however, noted that the NNPC could afford to crash the prices of petrol if it found an efficient mechanism around the key factors that affect prices. They include the foreign exchange, cost of money and other distribution factors, in managing its importation, distribution, and sale of petrol in the country, Kunle said.
According to him, “We want to see whether it is a political crash or real economic crash. A political crash would mean that they are subsidising petrol somewhere, but an economic crash can only happen if they have injected so much efficiency into the importation, in addition to the exchange rate advantage that they get directly from the CBN.”
Kunle further stated, “The factors that can lead to this include the level of efficiency in the import handling by NNPC, exchange rate from the CBN for the products they are importing, and level of efficiency in getting the product from the seaport in Lagos to the hinterlands.
“If you put these factors against the current pump price and there is room for price crash based on the scientific calculations, then it means their statement is not political but scientific. But if they cannot show the econometrics, that is how much they are importing petrol per litre, the time lag and turnaround time for vessels to offload and products to get to the distribution ends from the seaport, for us to determine the quantum of difference, then, I will still say it is a political price crash with no economic dimension.”
Oil industry experts who provided some explanations on the likely scenario for such price drop stated that the global market fundamentals on downstream operations were quite incongruent with the corporation’s report of a steady pump price slump