Nigerians will experience a further reduction in the pump price of Premium Motor Spirit, popularly known as petrol, in the coming weeks as a result of the recently introduced foreign exchange policy by the Central Bank of Nigeria, oil marketers have said.
The approved price for petrol is between N135 and N145 per litre. Currently, no filling station is dispensing the product at the lowest approved price of N135 as many sell between N140 and N145. But the marketers are optimistic that the PMS price will fall considerably from next month due to the latest forex policy.
On May 24, 2016, the Monetary Policy Committee of the CBN directed the management of the apex bank to adopt a flexible exchange rate policy in the inter-bank forex management structure.
The flexible exchange rate system, which commenced last Monday, is a monetary policy that allows the exchange rate to be determined by the market through the demand and supply.
The policy had ensured uniformity in the foreign exchange market, a development that industry experts and oil marketers said had cut down the huge capital outlay on forex, particularly when assessed from the black or parallel market.
The Corporate Affairs Manager, Nipco Plc, a popular oil marketing firm, Mr. Taofeeq Lawal, told our correspondent that some marketers were able to assess forex at N250 to a dollar when the policy was initially introduced by the central bank, as against the N360 rate at the parallel market.
He explained that at the new rate, which was less than the N288/dollar price as projected by the Petroleum Product Pricing Regulatory Agency, oil marketers had more chances to reduce the PMS price and still make a good profit.
When asked to specifically state when the petrol price would drop, Lawal said, “The PMS price has crashed; the issue is that maybe the crash is not up to what people are expecting. At N143, it has crashed by N2 and may still crash further, even if it is 50 kobo. But just hold on, a further reduction in price will come soon.
“For example, if you got the dollar at between N250 and N280 since the policy started last week, and government had projected it at between N285 and N289 as contained in the PPPRA template, then you should expect some crash in prices (of fuel) in the near future. Even if you get the dollar at N250 and you order for products, it will take a minimum of three to four weeks before the products will get to Nigeria.
“So, if the dollar rate can be maintained and if people can be lucky to get it below the projected N288 peg of government in the PPPRA template; and if you are able to get it at N250 and you want to pull volume, why won’t you reduce your price? Therefore, if the new forex policy is sustained, there is no way petrol prices won’t fall. So, sustainability is vital, as it will ensure further reduction in price, all things being equal.”
Similarly, an executive member of the Reconciliation Committee of the Independent Petroleum Marketers Association of Nigeria, Mr. Dibu Aderigbigbe, stated that some filling stations on the outskirts of Abuja were selling petrol below N140 per litre.
He said, “In Lagos, we’ve been seeing between N139 and N142 per litre and I can sure you that this price will further reduce as a result of the recent flexibility in the forex market. Because presently, we have the product everywhere and the problem we face now is reducing the demand due to lack of cash in the system.
“So, with the new policy, instead of buying a dollar at the black market rate of N350, since it has come down to between N280 and N285 – a difference of almost N75 on a dollar – it will definitely have some impact on the landing cost of the PMS and we will begin to see the effect of this within the next two to three weeks.”
On the possible price range that Nigerians should expect, Aderigbigbe said, “We should begin to see prices such as N130, N132, or N135 per litre, depending on the marketer. Maybe you need to know that the money used in importing products is largely borrowed and in order to pay back and avoid paying high interest rates, you have to make sales as fast as possible. Therefore, you just have to sell at the lowest price possible.”
Another dealer and member of the Major Oil Marketers Association of Nigeria told our correspondent that the price of petrol had already started falling.
The marketer, who spoke on condition of anonymity as he was not authorised to speak for MOMAN, said, “It might interest you to know that the PMS price has fallen because the demand for the product has reduced by over 40 per cent. And marketers are even struggling to sell their wares.
“The recent forex policy, of course, will warrant a further fall in petrol price as soon as products start coming in from next month, particularly if the policy is sustained. So, the challenge now facing marketers, unlike the situation in the past, is for us to see how we can dispense our products as fast as possible.”
The marketers also stated that various depot owners in the downstream sector had devised incentives to attract the PMS distributors in order to make considerable returns and sales.
On some of these measures, the Nipco spokesperson stated that aside from the recent forex policy, marketers had started adopting strategies that would further cut down petrol prices so as to effectively compete.
Lawal said, “Many of our stations in Lagos sell petrol at N143 per litre because on our own, we have put in an incentive scheme that can make you pull volume. The scheme is between N3 and N5, depending on the volume of purchase and it is for our dealers, not for everybody who loads at Nipco.
“So, if you buy good volume and you have N5 incentive, why can’t you pull N2 or N3 out of it and sell at N142 or N143? However, this is not a policy but just a scheme that is aimed at reducing the cost outlay and it does not affect all other components of the Federal Government with respect to the product.”
