Local refining, the obvious solution

Last week the National Bureau of Statistics (NBS) released the latest report in its premium motor spirit (PMS) price watch series. This shows the average monthly price for PMS (petrol/gasoline) paid by households across the country. In February it averaged N149.8/litre (l) for the 36 states of the federation and the FCT, and so above the fixed upper price limit for the retail pump price of N145/l set by the authorities.

The average price of gasoline in February represented a 0.7% m/m increase. Yobe State had the highest price for PMS at N177/l while Lagos State had the lowest with N144.9/l.

Generally, PMS is sold above the fixed upper limit in most states. We assume that oil marketers might be attempting to maintain reasonable profit margins.

However, we note that the NNPC remains the dominant supplier of PMS. Last month, the corporation had announced it would increase supply by providing six additional PMS cargoes of 37,000 tonnes each.

Inflation data for February was released this week. The NBS commentary cites that on a year-on-year basis the highest price increases were recorded for electricity, lubricants and fuel for passenger transport such as PMS.

Local refining, the obvious solution Sources: NBS, FBNQuest Research

Boosting local refining capacity should play a key role in pushing gasoline prices down. Nigeria’s current refining capacity utilisation is c.14%; the NNPC has set out to resuscitate the refineries and is close to completing the first phase which requires securing expressions of interests from potential partners with technical and funding capacity.

Additionally, the Dangote Group is constructing a 650,000bpd refinery in Lagos which is set to begin operations in 2019; this should also assist in reducing reliance on imported fuel.

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