The Nigerian National Petroleum Corporation Limited (NNPCL) has said that the sudden increase in fuel pump prices from N540/litr to N617/litre is merely the market forces at play.
Group Chief Executive Officer of NNPCL, Mele Kyari, explained this after meeting with the Vice President, Kashim Shettima, at the Presidential Villa, Abuja, on Tuesday.
Kyari explained that the problem is not a shortage of supply of product, adding that “Rather, the forces of demand and supply in the marketing value chain was simply taking effect.”
He said importers of fuel product were gaining confidence in the system, noting that prices were bound to go up or down from time to time.
According to Kyari: “I don’t have the details this moment. But we have the marketing wing of our company. They adjust prices depending on the market realities.
“This is really what is happening; this is the meaning of making sure that market regulates itself so that prices will go up and sometimes they will come down. This is what we have seen and in reality, this is how the market works”.
On whether there was shortage of product in the market to have warranted the increase, Kyari said: “No. There is no supply issue completely. When you go to the market, you buy the product; you come to the market, you sell it at the prevailing market prices. It has nothing to do with supply shortage. We don’t have supply issues. There is robust supply. We have over 32 days of supply in the country.
“Yes, what I know is that the market forces will regulate the market. Prices will go down sometimes; sometimes it will go up. But there will be stability of supply and I am also assuring Nigerians that this is the best way to go forward so that we can adjust prices when market forces come to play.
“I don’t have the details this moment, but I know that our marketing wing acts just like every other company in this business. I know that a number of companies have imported petroleum products today. So, many of them are in line. I’m sure my colleague would confirm this. Market forces have started to play; people have started having confidence in the market. Private sector people are importing products, but there is no way they can recover their cost if they cannot take market reflective cost”.
The Chief Executive Officer, Nigerian Mainstream and Downstream Petroleum Regulatory Authority (NMDPRA), Farouk Ahmed, while corroborating the NNPCL chief executive, debunked insinuations that the new price adjustments were set by the NNPCL.
According to Ahmed: “As a regulator, I told you back in May that we are not going to be setting price. The market will determine itself and as you saw back in early June when prices came out. It was based on the cost of importation plus other logistics of distribution and of course, the profit margin by the importer. This market is deregulated; it is open to all participants.
“As I mentioned yesterday when I was in Lagos, we have about 56 marketing companies that applied and obtained licenses to import. Out of those, 10 of them have indicated to supply within the third quarter, which is July, August, September.
“Already, we received some cargoes from these marketers: Prudent Energy, AYM Shafa and Emadeb. Emadeb Cargo is arriving tomorrow. So, this is just an encouragement to see that the market is liberated and everyone is free to import so long as you are working within the framework, especially in terms of quality. But on pricing, as a regulator, we are not going to put a cap on the price because we are not part of those importing. We are not a marketing company; we are just a regulator.
“So, when you say market forces are working, basically, what it is that you buy; you consider the price of crude going up. A couple of weeks ago, the price of crude was hovering around $70/barrel.
“Now it’s hovering around $80/barrel. So, the crude price also drives the product price. You know, because the importers are importing, they are basing it on the cost of importation plus the freight and other cost elements in terms of local distribution”.
