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Petrol should sell for far less than N87 per litre

-Nigerians rap Jonathan over N10 reduction

THE reduction in the pump price of petrol by the Federal Government has been faulted by a section of Nigerians who insist the action is belated.  Some even argued that petrol should sell far less than N87 per litre.

First to react to the adjustment in petrol pump price was APC House of Assembly candidate, Barrister Tunde Braimoh.

President Jonathan
President Jonathan

“It’s is a Greek gift.  It is cosmetic.  It is irrational in the circumstances. It cannot be appreciated because it is unnatural. It is calculated to hoodwink and bamboozle Nigerians.  Why is it coming days to his re-election bid?  Let him face the real issues.  Where is the food?  Where is healthcare?  Where is education? Where is shelter?  Where is security?  Where is welfare and social well being?  Where is life?” Barrister Braimoh said in an exclusive phone interview with ENCOMIUM Weekly on Monday, January 19, 2015.

The former Chairman of Kosofe Local Government Area also queried Jonathan’s intention, while urging Nigerians to be weary of another politically motivated act of kindness.

Similarly, constitutional lawyer, Chief Fred Agbaje has also rapped President Goodluck Jonathan for the N10 pump price reduction. He spoke with ENCOMIUM Weekly on the issue on Monday (January 19).  Chief Agbaje reasoned:

“No thanks to the FG for the reduction. The reduction is belatedly political.  Why now that electioneering is on?  If the reduction is to enable PDP garner support, wo ti si ibon gbe (PDP misfired).  The so-called ten per cent reduction is grossly not enough. It should be reduced to N50. After all, the FG led PDP is responsible for the mismanaged economy.”

There has also been countless anonymous anti-Jonathan comments trailing the new petrol pump price in the social media.  Here are some of them:

“The fall in global oil price started as far back as July last year.  This government did not deem it fit to reduce pump price in August, September, October, November or December…! Oh, the Minister said the government just “found it safe to implement the reduction?

Diezani Allison-Madueke
Diezani Allison-Madueke

“So, madam Minister, what will happen to the money you made before you “found it safe to implement the reduction?  After all, we bought fuel (for about five months) at the old rate.  Eagerly, waiting to hear Metuh and Okupe’s reaction.  I thought they described APC as ‘desperate’ and ‘ignorant’ when they asked for reduction. Who’s now desperate?  Who’s ignorant?

“We are enjoying GEJ’s last minute ‘gifts.’  Last week, GEJ surprisingly visited Borno. This week, GEJ has reduced pump price. What should we expect next week?  Free Phones for all Nigerians?.  GEJ is one smart Alec. He’s ready to do everything and anything to hoodwink Nigerians. His tactics is too obvious: reduce pump price and increase it to 141 NAIRA (after removal of fuel subsidy which will come after elections).  But come to think of it, they must think Nigerians are dumb. They said the implementation of the VAT rate on Tokunbo vehicles will begin after elections.  They’ve also said they will remove fuel subsidy after elections.  So, how can they think a sensible person will fall for all these election tactics?

“Did anyone notice the pump price in other oil producing countries?  It’s a shame that we are paying more than thrice of what other countries are paying for pump price. Before GEJ, fuel was N65. He increased it to N140 and then reduced it to N97 and now, N87.  I just need one answer: what difference can we say the increment from N65 has achieved? Let me conclude by saying this: ‘The handwriting is on the wall.”

Another commentator claimed: “Ask Jona what he is doing about kerosene from 49.00 per litre to N120.  Ifeanyi Ubah is using the difference to sponsor TAN.  God will judge you and all your sponsors.”

“Jonathanians are only deceiving themselves but thinking they are manipulating and deceiving Nigerians.  Then hear what Madam Madueke said as regards this “eleventh minute abracadabra reduction in the pump price.”  She said: “I do hope the entire country will benefit immensely from this reduction in the pump price of petrol.”

We then need to ask Madam Okonjo Iweala what gives her such general impression that the entire country will benefit immensely from that reduction in the pump price of petrol when the living costs have skyrocketed with the first increase in the pump price of petrol the last time the price was increased from N65 to N97?  Will she tell all our market traders to also reduce the prices of commodities in the market, which had already been increased with the last increase in the pump price of petrol, now that the pump price of petrol is reduced? What have they done with the huge subsidy funds already realised from the removal of subsidy on petrol?  What have they even done about the epileptic state of electricity supply in the country despite the fact that pump price of petrol is reduced? Will this reduction make many of dead Nigerian small scale businesses revived or come back to life? Why are they always deceiving us just because presidential election day is around the corner?”

But defending President Jonathan, a pro-government commentator made the following submission: “It happens while APC cry foul all the time.  Why has he not visited North East? The man did, APC cried it came too late.  (Why has petroleum pump price not reduced?  The man did, APC says the oil fell since July, so why now? Why are we still importing rice?  The man improved agriculture to an extent that Nigerians now eat cassava bread, yet APC complains.  (Why is our mass transit system not working, the man says it can’t be done by buses, but by rail, revived our rail system, APC says Japan is using supersonic trains, yet they commute with an air conditioned GEJ improved trains.  Why is our medical sector not improved?  APC set up strike in that sector, yet Ebola and polio was successfully eradicated, APC claims it was Fashola and Amaechi who cured Nigerians of Ebola and polio.  Why is our electricity not restored?  The man revived the sector, electricity generation improved to 4,250mwts, now what APC does is send the hoodlums to sabotage gas lines supplying gas to the power generating turbines.  When the man came up with the idea of installing a solar powered electronic monitoring device on the pipelines (what a genius), why has he not fought corruption?  The man agrees he hasn’t done much in that area, but have master plan for strengthening all agencies, to curb corrupt practices, since the judiciary failed to do their job, as many of them are affiliated to APC. (Sabotage), but APC still CRIED FOUL saying culprits must be put in crates and extradite them to jail without trial.  Why has the man not done our roads?  The man inaugurated NERHMA and so many roads, including the most forgotten Lagos/Ore/Benin/PH East West road, with new Niger Bridge currently under serious construction.  APC says the budget is too much. Who has the man not created job?  The man created over 200,000 jobs in one year via SURE-P alone.  APC says those jobs do not suit graduates.  My question to APC is, is this the kind of politics you think will get you to power and keep you there?  I’m sure the wise ones amongst you will say no. Please, re-strategise or you won’t go nowhere come.”

The Federal Government on Sunday, January 18, 2015 announced a reduction in the pump price of petrol by N10 from N97 to N87 per litre.  The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, declared the reduction while briefing State House correspondents at the Presidential Villa, Abuja.  She said the reduction was because of the recent drastic fall in the prices of crude oil in the international market.  The minister also directed the Petroleum Products Pricing Regulatory Agency (PPRA) and the Directorate of Petroleum Resources (DPR) to immediately effect the change.

“As you may be aware, there has been a lot of volatility in the price of petroleum products, particularly crude oil, over the last few months. Invariably, this has meant that the price of the product in Nigeria has also been greatly impacted. It is as a result of this, under the approval and directive of Mr. President and in line with Section 6 Clause 1 of the Petroleum Act, that it is my responsibility as the minister of Petroleum to announce that there will be a reduction in the pump price of petrol (Premium Motor Spirit) by N10.  Therefore, the reduction will be from N97 per litre to N87 per litre effective as from midnight, Sunday January 18, 2015. In line with this, I have directed the Petroleum Product Pricing Regulatory Agency and the Directorate of Petroleum Resources to ensure that there is strict adherence to this new pricing regime as soon as it takes effect from midnight Sunday, January 18, 2015.  I do hope the entire country will benefit immensely from this reduction in the pump price of petrol.”

The minister said the Federal Government had been watching events carefully in the last two weeks to ensure that volatility did not destabilize the reduction in price.  She said the FG had found it safe to implement the reduction at this time.

Following violent demonstrations against the decision of President Jonathan to remove subsidy on the product per litre as announced on January 1, 2012, it was forced to cut the pump price from N141 to N97.  The Federal Government, through the PPPRA, had before now maintained that the N97 fixed in 2012 after protests against the decision of the government to withdraw subsidy on the product.

Energy analysts who consult for fuel importers in Nigeria had calculated that the product ought not to sell for more than N84 at filling stations across the country, thereby automatically wiping off the government’s subsidy on petrol.  Their stand was corroborated by a website, globalpetrolprices.com, which claims to be providing the most wide-ranging and reliable data on retail fuel prices around the world, which put the price at which fuel ought to be sold in Nigeria at N87.39 per litre.

The website, according to media reports, says its data are collected on a weekly basis using information from government institutions, regulatory agencies, major media sources and oil companies.  Using the spot price of gasoline in the Amsterdam-Rotterdam-Antwerp refining hub in Northwest Europe, where most of the country’s fuel import comes from, the source said on Friday that the product cost and freight component of petrol pricing was $511 per metric tonne or N63.10 per litre, using the PPPRA exchange rate of N171.36 to a dollar.

The spot price for ARA gasoline 10ppm, the source claimed, was $461 per metric tonne and the freight rate was $50 per metric tonne.

The cost and freight of PMS as of December 29, 2014 was $566.57 per metric tonne or N72.40 per litre.  On that day, the price of global benchmark Brent crude closed at $57.94 per barrel.  Other items in the PPPRA pricing template include trader’s margin (N1.28 per litre), lightering expenses (N3.91 per litre), Nigerian Ports Authority fee (N0.67), financing cost (N0.35), jetty depot throughput charge (N0.80), and storage charge (N3.00). The distribution margins comprised retailers (N4.60), transporters (N2.99), dealers (N1.75), bridging fund (N5.85), marine transport average (N0.15) and administrative charge (N0.15), which added up to N25.50.

As of December 29, 2014, when the PPPRA last updated the pricing template, the Expected Open Market Price (retail price) of petrol was N97.90 per litre (addition of the cost of petrol and freight at N72.40 and the extra N25.50), with subsidy on the product dropping to N0.90 per litre, compared to N44.94 on November 3, 2014.

ENCOMIUM Weekly further learnt that crude oil was $57.98 on December 29 and $46.26 on Tuesday (January 13).That represents 25 per cent fall in crude oil.

Data obtained from globalpetrolprices.com on Sunday put the market price of petrol in Nigeria at $0.51 per litre as of January 12; that is, N87.39, using PPPRA’s exchange rate of N171.36 to a dollar. On the day the price was calculated, Brent crude, equivalent of Nigeria’s Bonny Light, sold for around $48 per barrel in the international market.  However, the price of crude has since fallen further. It was $46.03 on Sunday.  It put the prices of petrol for other oil-producing countries such as Libya, Saudi Arabia, Algeria, Sudan, Qatar and Oman at $0.12, $0.16, $0.26, $0.35, $0.27 and $0.31, respectively.

There have been calls on the Federal Government to reduce the pump price of petrol because of the sharp decline in the price of crude oil, which constitutes a major component in the pricing template.  The Minister of Finance, Dr. Ngozi Okonjo-Iweala, had in the overview of the 2015 budget proposal dated December 17, 2014, said preliminary estimates showed that “the break-even crude oil price at which the landed cost of PMS will equal our current price of N97 per litre so that there will no longer be subsidy is about $60 per barrel. It is only when the crude oil price (Bonny Light) falls below this level that the pump price of PMS (which includes N15.49 per litre distribution and Petroleum Equalisation Fund costs) can begin to come down. The breakeven price of crude oil would have been higher were it not for the N15.49 per litre distribution margin.

“Many Nigerians have rightly asked when the pump price of Premium Motor Spirit will be reduced, given the declining price of oil. As you know, the relevant agency of government responsible for petroleum product pricing matters is the PPPRA.  The information we have is that they are now updating their template based on recent developments and we hope they can address this issue soon.”

As at the time of filling this report petrol was still sold at the old price of N97 per litre.  Insiders claimed that the pump price of the product had not changed in filling stations before now because the Federal Government had made an arrangement with petroleum product marketers to use the difference between the regulated price of N97 per litre and the reduced retail price to settle the arrears of subsidy being owed the importers.

The landing cost of petrol dropped to N82.41 per litre as of December 29, 2014 from N127.57 on November 3, according to PPPRA data.

-UCHE OLEHI

Encomium

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