.Subsidised crude for local refineries key to fuel price stability – Expert
CHIGOZIE AMADI
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) says fluctuations in fuel pump prices are a direct result of market dynamics under Nigeria’s deregulated downstream petroleum sector.
The authority’s spokesperson, George Ene-Ita, said this in an interview with the News Agency of Nigeria (NAN) in Abuja while reacting to the recent increase in fuel pump prices linked to the ongoing Middle East crisis.
NAN reports that many motorists in Abuja have expressed concern and dissatisfaction over the recent hike in prices of Premium Motor Spirit (PMS) called fuel, which were previously sold between N875 and N880 per litre.
Currently, independent marketers are selling fuel between N960 and N1,000 per litre and above, while outlets of the Nigerian National Petroleum Company Limited are selling at about N960 per litre.
Nigerians have expressed concern on the justification for the increase in pump price and the implications to the country.
Ene-Ita said the variations in pump prices across the country were not due to regulatory interference but were driven by supply and demand forces within the market.
“Nigeria has been operating a fully deregulated downstream petroleum regime since the inception of the current administration.
“Therefore, pump price vagaries are purely as a result of market dynamics,” he said.
He explained that under a deregulated framework, petroleum product prices responded to prevailing market conditions.
He added that the policy direction was aimed at allowing market forces to determine prices while encouraging competition, efficiency and increased investment in Nigeria’s downstream oil and gas sector.
However, an economic expert, Dr Chijioke Ekechukwu, has urged the Federal Government to supply crude oil to local refineries at subsidised rates to cushion the impact of global supply disruptions on domestic petroleum product prices.
Ekechukwu, who is the Managing Director/Chief Executive Officer of Dignity Finance and Investment Ltd., made this known on Sunday in Abuja in an interview with the News Agency of Nigeria (NAN).
Ekechukwu was reacting to the middle-east crisis and global tensions for the energy sector, particularly Nigeria’s petroleum industry.
The recent tensions involving the U.S., Iran, Israel and allied nations, including hostilities particularly around the strategic Strait of Hormuz has intensified geopolitical pressure and significantly disrupted energy markets and supply chains.
Reacting to this, the economist explained that in a deregulated petroleum products market, prices were largely determined by global demand and supply dynamics.
According to him, the tensions, which have triggered supply distortions across the Gulf region, naturally pushed international oil prices upward due to fears of reduced supply from major crude oil producing countries.
He said that such geopolitical crises usually led to market volatility and higher prices, as key suppliers of crude oil were affected by the instability.
To mitigate the impact on Nigerians, Ekechukwu advised the Federal Government to prioritise domestic energy security by supplying crude oil to local refineries at discounted rates.
He said the arrangement would enable refineries to process and sell petroleum products locally at relatively stable prices, while Nigeria continues to export crude oil at prevailing international market rates.
“In the case of the U.S.-Iranian war, which culminated in supply distortions around the Gulf countries, prices will automatically react to a shortage of supply.
“Prices, therefore, are expected to rise because major crude oil suppliers are in crisis.
“For the Federal Government therefore to cushion the effect of this supply distortion, which has affected the global price, we should supply crude oil to our local refineries at subsidised prices to refine and sell at regular prices,” he said.
He added that with its massive refining capacity, the Dangote Refinery was capable of meeting a significant portion of Nigeria’s domestic demand for refined petroleum products, thereby reducing dependence on imports.
He further emphasised the need for stricter border controls to prevent the smuggling of refined petroleum products out of the country, warning that weak enforcement could undermine efforts to stabilise local prices.
According to him, tightening border security alongside targeted crude supply to domestic refiners will ensure that the benefits of the policy are retained within the country and shield consumers from sudden price hikes.
