Pump price relief unlikely as marketers dispute N300/litre possibility

Estimated reading time: 4 minutes

Motorists hoping for a significant drop in petrol prices might be disappointed. Major oil marketers under the aegis of the Major Oil Marketers Association of Nigeria (MEMAN) have cast doubt on the feasibility of the pump price reaching as low as N300 per litre, despite speculation fueled by the upcoming production from the Dangote Refinery and other indigenous facilities.

MEMAN argues that achieving such a low price point hinges on the Federal Government’s commitment to supplying adequate crude oil to domestic refineries. They highlight the high cost of imported crude oil, pointing out that even at current global prices of around $80 per barrel, the cost of refined petrol from imported crude oil is significantly higher than N300 per litre.

“A lot of companies today benefit from the importation of petroleum products at the expense of Nigerians,” the Publicity Secretary, the Crude Oil Refinery Owners Association of Nigeria (CORAN), Eche Idoko was quoted to have told the press.

He added, “If we begin to produce PMS today in large volumes, provided there is adequate crude oil supply, I can assure you that we should be able to buy PMS at N300/litre as the pump price.

“Why make Nigerians buy it at almost N700/litre when you know that if you allow refineries to work the price will come down? Is it because you want to satisfy the global refiners abroad that are making so much from us?”

• NNPC says no plan to increase PMS pump prices
• Dangote refinery takes top spot in capacity, raising competition concerns
• OPEC reveals Nigeria’s refining capacity crashes to 6,000b/d
• Relief for Nigerian refineries: Local operators now permitted to pay for crude in Naira
• Nigeria’s oil revenue soars by N450bn in two months

However, while speaking with Channels Television on Monday, a former chairman of MEMAN and current Chief Executive Officer of 11 Plc, Tunji Oyebanji, said the price of petrol could not drop as low as ₦700 per litre.

“One barrel of crude has 159 litres. Currently, a barrel is about $80. Multiply that by ₦1,400, and you get 1400 x 80= ₦112,000 for a barrel of crude. Divide ₦112, 000 by 159, and it gives you ₦702 per litre of crude only. No refining, no transportation, no finance cost, and no distribution margins. Just ordinary crude is ₦702,” he said.

This statement contradicts earlier claims by some industry stakeholders, including the Corporate Responsibility and Environmental Watch Initiative (CORAN), who suggested that local refining could lead to a substantial price reduction.

MEMAN’s explanation sheds light on the complex factors influencing petrol prices in Nigeria. Here’s a breakdown of the key points:

• Global Oil Prices: The high cost of imported crude oil remains a major obstacle to lower pump prices.
• Refining Costs: The refining process itself adds to the final price, even with domestically produced crude.
• Government Policy: The availability of crude oil for local refineries depends on government allocation policies.

While increased domestic refining capacity offers a long-term solution for price stability, immediate relief for consumers appears unlikely. MEMAN’s statement suggests that the current pricing structure, heavily influenced by global oil prices and import costs, may remain in place for the foreseeable future.

However, the discourse surrounding local refining reignites a crucial discussion on Nigeria’s energy security and independence. Increased domestic refining capacity could potentially mitigate the impact of global oil price fluctuations on pump prices in the long run.

The onus now falls on the government to address the concerns raised by MEMAN. Ensuring a reliable supply of crude oil to domestic refineries and exploring further downstream sector development could be key steps towards a more stable and potentially more affordable domestic fuel market.