A petroleum products marketer who preferred anonymity, has sighted the reason Nigeria’s premium motor spirit price has been reducing in the past months.
The marketer stated that the main factor responsible for the drop in fuel prices is the implementation of the deregulation of the downstream oil sector.
He said while some suggestions have attributed the reduction in petrol price to increased local refinery capacities and the Crude for Naira initiative, the overriding reason for falling prices is a direct consequence of competition enabled by the deregulation or liberalisation of the downstream sector.
READ ALSO: Again, Dangote Refinery Reduces Fuel Price
This comes as Dangote Refinery’s latest price reduction move dropped its depot price to N815 per litre from N825 last month.
Although the latest ex-depot petrol price drop is yet to impact retail prices, DAILY POST reports that Dangote petrol is sold between N860 per litre and N880 at MRS filling stations and other Dangote partner filling stations.
Earlier, it was reported that the landing cost of petrol dropped to N774.82 per litre, cheaper than Dangote petrol, which stood at N825.
Speaking on the latest petrol price drop, the marketer said the product price may soon drop to N800 per litre without specifically mentioning a timeline.
“Prices of gasoline have continued to fall and may soon go below N800. The big question is why. Many suggestions are being made as to the reason behind this phenomenon. Some suggest it is purely local refining capacity. Others suggest it’s the Crude for Naira initiative,” he said.
According to him, whatever the reason for falling petrol prices, it remains a welcome relief to Nigerians.
“Whatever the cause, it is definitely a welcome relief to consumers and will simultaneously help to ease the inflationary pressures in the economy.”
He emphasised, “The overriding factor from my perspective is that the falling prices are a direct consequence of competition enabled by the deregulation or liberalisation of the downstream sector. We had often made this point in arguing in favour of this policy. Unfortunately, many stakeholders, including labour, pushed back, allowing the country to almost go bankrupt before the policy was finally implemented. We should, however, note that prices can also go up in this deregulated environment. The only way to ensure that prices remain at their lowest possible level is to ensure very robust competition in the industry.”
Highlighting the need for competition in the downstream sector, he said no single entity should dominate petrol supply in Nigeria.
“This means, in particular, that no single entity should dominate the supply to the country. Today, local refineries would prefer that there be no imports. To achieve that goal, they must continuously keep their prices low. The minute you remove that counterbalance, there will be no incentive to keep prices as low as possible,” he said.
He noted that petrol prices are being forced down because imports are still being allowed.
“My own take is that prices are being forced down because imports are still being allowed,” the source said.
“The authorities should continue to monitor to ensure that only quality products are being imported and, at the same time, ensure that there is a balance between total consumption in the country, local production, and imports.
“Ultimately, local refining of our crude is good for us. However, there must be an incentive for local refiners to keep their prices at the barest profitable minimum through limited and controlled imports. Local refineries also always have the option of exporting excess production to earn dollars,” he explained.
