The Federal Government is considering a review of pricing policy for Premium Motor Spirit (PMS) also known as petrol, to save the Nigerian National Petroleum Corporation (NNPC) from the burden of under-recovery in the downstream sector.
Besides, government is facing international and domestic pressure to fully deregulate the downstream sector, as stakeholders in Ghanaian and Nigerian petroleum industries emphasised the need to liberalise the sector.
Under the proposed new pricing regime, the price of petrol would be controlled by the global price of crude oil. For instance, consumers are to pay more when the barrel of crude is high and conversely.
The NNPC had taken responsibility of under-recovery since the introduction of petrol price modulation. It was said that the corporation recorded ‘under recovery’ of N49.86 billion between January and March this year due to high crude oil prices.
Under-recovery occurs when the expected open market price of petrol, including cost of importation and distribution, falls below official pump price.
The agency, it was reported, had to bear the burden following the removal of subsidy regime partial deregulation of the downstream sector.
To unburden the national oil organisation, the Minister of State for Petroleum Resources, Ibe Kachikwu, submitted yesterday that the country must find a formula-based pricing system that allows consumers to enjoy friendly prices.
Speaking at the ongoing African Downstream Oil Trading and Logistics (OTL) Expo 2017 in Lagos, Kachikwu said this would enable investors forecast with some degree of accuracy cost recovery and returns on investment.
“Fiscal conditions of the downstream are being considered. Multi-layer charges by various arms of government must have to be streamlined. The fiscal policy review document is currently being processed,” he added.
On the challenges confronting the downstream sector, Kachikwu, who was represented by the Deputy Director, Upstream, Ministry of Petroleum Resources, Kamoru Busari, said: “The refineries continued to struggle and they are down most of the time. Most of the pipelines are either being vandalised due to militancy or are ruptured over a period of time due to non-replacement. A lot of money are being owed marketers from the subsidy era.”
He offered some solutions to include attracting investment into the refinery sector, embarking on massive rehabilitation of the existing ones as well as establishing greenfield facilities to save the country from importing petroleum products.
To enhance liquidity in the sector, the minister said he was working with the Central Bank of Nigeria to ensure access to foreign exchange.He disclosed that government would put in place a domestic funding line to enable investors access funds.