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Hike in petrol price inevitable- IPMAN, others

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Analysis

Hike in petrol price inevitable- IPMAN, others

NEWISSUES, Abuja

Speculations of possible increase in price of Premium Motor Spirit, PMS, otherwise known as petrol, may not be considered mere, as the Independent Petroleum Marketers Association of Nigeria, IPMAN, Thursday, warned of threat to product availability in the country, as it is gripped with series of challenges confronting the petroleum sector.

This came as experts have blamed marketers of insensitivity to price moderation when government placed a cap on petrol price in May. But, other operators have argued that the price of petrol is driven by laws of economics, which cannot be altered for a long time, and as such is expected to increase giving the current challenges of FOREX and others.

Speaking to Vanguard, National President, IPMAN, Mr. Chinedu Okoronkwo, stated that flexible way to assessing FOREX has been given rather than black market dependence for the purpose of importing critical items to the country.

He said, “But I will advise for total deregulation. The price moderation, which is the cap placed is not healthy for the petroleum industry to grow.

“There are people who have the FOREX to bring product and sell. By so doing, FOREX will crash. But when the industry is over protected like ours, the current challenges will be unending. The market force should drive the price.”

He stressed that, “If the refineries are working to a good capacity like 70 percent, the product will not be less than N130 per litre. We should focus on making the refineries work. Because by the time you keep on importing, FOREX challenges will keep on re-occurring and there would no head way.

“The Nigeria National Petroleum Corporation, NNPC should ensure that the refineries are working, as well as the government should grant all support needed to ensure that they work so the country can avert all of the turbulence hitting the petroleum sector as well as the economy.” He added that the industry should be like any other sector in this country.

“The best way to do that is for the government to hands off, and sometime coming in to intervene when need arise.” Modular refining the way He however, urged the federal government to as a matter of urgency encourage the setting up of modular refineries in the country as a booster to spur up refining of crude product.

“The government should encourage the installation of modular refineries in virtually all local government. For example, Ivory Coast has one refinery which is old and yet it is working and giving them the satisfaction to an extent.”

He noted that the association plans to invest on building a modular refinery to assist refining of the product.

“We had brought some investors to Nigeria. In Kogi, we had been given land to build a modular refinery.” He further urged for good policy in the sector to drive the needed investment for growth in the petroleum sector.

“The body language of the government must be seen. An enabling environment should be guaranteed and encouraged for investors to harness.”

Markers to blame Meanwhile, a renowned Petroleum Economist and President, Nigerian Association for Energy Economics, NAEE, Professor Wumi Iledare, blamed marketers for misunderstanding the intentions of government when it hiked the price of petrol in May.

According to him, “the concept of fixing a price at N145 per litre introduced by government in May this years was actually suppose to be a ‘price feeling’ and not ‘price floor’.” He noted that petroleum marketers refused to allow the system work itself out but merrily took the product’s price from N87 per litre to N145 per litre, stressing that the action then was uncalled for as it was not the intension of government then for PMS to be sold at the floor price from the beginning.

According to him, “Because the marketers converted price feeling to price floor that is why now they want it to go up.” He explained that, “If they had gradually increased it from N87 per litre to may be N100 per litre, there would not have been any problem now, but they went for the wrong one in other for them to make profit during the time.

“At the time the marketers hiked the price of petrol to N145 per litre the breakeven price of the product using the exchange rate to a dollar then was below N125 per litre. For the fact that the marketers went for 145 per litre, paved way for the trouble currently besetting the clamour for price hike. Explaining the details of what transpired, he said,

“If you remember at that particular time, the exchange rate was N285 to US$1 but now there is no place to get a dollar for N285 and that is why the marketers are struggling.

“If they had increased the price to N120 per litre at that particular time, by now they would have the opportunity to get the price towards N145. But instead, they went for the jugular at that particular time. And as we know, they cannot on their own increase the price of petrol because the act that set up the Petroleum Products Pricing Regulatory Agency (PPPRA) as the price regulator is still there,” he added.

-Vanguard

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