The pump price of petrol may be witnessing an increase as FG is set to add
to it, strategic reserves’ financing cost.
There could be a further increase in the retail pump price of petroleum
products like petrol, kerosene and diesel.
This is due to the Federal Government’s proposal of the addition of the cost
of managing the national strategic stocks of petroleum products to the retail
price of the commodities.
According to a report from Vanguard, this proposal is contained in the 2020
Petroleum Industry Bill (PIB) which is currently before the National
Assembly for passage.
This means that the passage and subsequent signing into law of the PIB,
will lead to further increase in the pump price of petrol. Other things being
equal, as the cost of managing the national strategic fuel stocks would, from
then, form an integral component of the pricing template of petroleum
products and would determine the pump price of the commodities.
Other current components of the pricing template, apart from the landing
cost include the National Transportation Average (NTA), the Nigeria Ports
Authority (NPA) charges, marketers margin and transportation costs.
In the new PIB that is before the National Assembly, the new Nigerian
Midstream and Downstream Petroleum Regulatory Authority that would
emerge from the scrapping of the Petroleum Products Pricing Regulatory
Agency (PPPRA) and the Petroleum Equalization Fund (PEF), is to be
saddled with the responsibility of setting up and managing the national
strategic stocks of petroleum products.
The new agency would determine the amount to be charged as a levy for
financing the strategic petroleum products’ reserves. Which would form part
of the retail price of each of the petroleum products, and also mandate to
work with security agencies in deciding areas of the country where the
national strategic stocks would be maintained and distributed. The 2020
PIB partly reads;
“ The Authority shall: establish, administer and ensure the storage
and distribution of the national strategic stocks of petroleum
products in accordance with regulations issued by the Authority.
Determine and publish the amount to be charged as a levy for the
financing of the national strategic stock, which shall form part of
the retail price of each petroleum product, such levy to be
determined as a percentage of the retail price and be deducted on
a wholesale basis; and
Designate, in consultation with the appropriate authorities and
national security agencies, the strategic locations across the
country where the national strategic stocks shall be distributed
The PIB is also proposing that facilities and infrastructure which are to be
specifically defined by the soon-to-be-established Nigerian Midstream and
Downstream Petroleum Regulatory Authority for the storage of national
strategic stocks would be exempted from the provisions of the law relating
to open access.
The other functions of the Nigerian Midstream and Downstream Petroleum
Regulatory Authority in the new PIB include; regulating and monitoring
technical and commercial midstream and downstream petroleum operations
in Nigeria, and determining appropriate tariff methodology for processing of
natural gas, transportation and transmission of natural gas, transportation of
crude oil, and bulk storage of crude oil and natural gas.