By BusinessNews

Following recent disclosure by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu that government would review and present new cost-reflective pricing template for domestic petrol sales and consumption, the Nigerian National Petroleum Corporation (NNPC) and Petroleum Product Pricing Regulatory Agency (PPPRA) yesterday said that they had begun work on it and that a new template would be out by the first quarter of 2016.



WE gathered from officials of these agencies that from the expected price modulation model which the government seeks to adopt, pump price of petrol may initially drop from the current N87 per litre next year when the government perhaps shaves off a couple of costs that influence domestic price of the product.

WE learnt from the officials working on the new template for petrol that the government had already identified possible costs reduction areas from which about N10 per litre may be cut off.

Accordingly, these areas may include the amount of bridging claims paid out by the Petroleum Equalisation Fund (PEF); foreign exchange differentials, amongst other logistics costs which marketers incur in the course of bringing in and distributing products in the country.

After a meeting in Abuja, the Group General Manager, Corporate Planning and Strategy of NNPC, Bello Rabiu disclosed to journalists that the PPPRA would release the new pricing template before the end of Q1 2016.

Rabiu said that the adjustments that would be made in the new template could ultimately lower the cost of product importation and distribution in the country.
He noted that due to the uncertainty in the prices of crude oil in the global market and abundance of crude oil, the cost of bringing petrol has subsequently dropped from what it used to be some two years back.

According to him, as at Thursday the cost of bringing one litre of petrol to the country was N65 while the logistics involved in taking it to the depot and to the filling stations were about N10.55 and N15.49, which brings the open market price as at today at N91.52 per litre.

Rabiu said: “We are engaging industry stakeholders to review the PPPRA template that actually drives the cost of importation. This is because the actual cost of PMS minus the retail price of the product is subsidy. So if the cost falls to N80 per litre today, then where will the need be for subsidy? If the cost is less than the current retail price of N87, then it means there is no subsidy.

“So, we are looking at the template to have it reviewed considering the realities on ground now in the sector. What if after the review, we are able to take away about N10 from this current template, which today puts the cost of petrol at N91.52 litre, then it means the cost may come down to around N82 per litre.

“That is why we said there is no need for subsidy in the 2016 budget. We say this because we know that the price of crude oil will not go so high in the next 12 months because of the high level of saturation in the market. So as soon as it is appropriate, we will announce a new price for PMS.”

Rabiu stated that the adjusted template would be used subsequently to modulate prices down or up on a periodic basis if required, adding that if oil prices continue to fall and inefficiencies are eliminated within the template, there will be surely negative subsidy.
He noted that the negative subsidy shall be remitted to the Petroleum Support Fund in line with the current PPPRA guidelines.

“The savings under such a regime could be domiciled in the PSF as a buffer to and future subsidy (if any) that may arise during high oil price regime or invested by the industry in supply and distribution efficiency improvement projects such as decongestion of Apapa area, Single Point Monitoring in Port Harcourt and Warri, complimentary rail services, inland waterways


Source:http://www.nairausd.com/2015/12/nnpc-reduction-of-pump-price-is-possible.html?m=1

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Fighting corruption with corruption...two wrongs can never make a right.We're watching!!
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