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 December this averaged N146.7/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.
Given the increase in global oil prices (UK Brent is currently trading at US$54/b) as well as persistent challenges with accessing fx to import PMS, supply from petroleum marketers has plunged.
The revision of the maximum price in May 2016 from N97/l to N145/l assumed an exchange rate of N285/US$1, compared with the CBN’s current administered rate of N305. Industry sources suggest that oil marketers are owed over US$1bn for the importation of petroleum products with accumulated interest as high as N160bn (US$520m).
Essentially, the economy is relying on PMS supply from the NNPC. Following the surge in costs which, we estimate, has pushed total costs above N145/l, it appears that in the first instance the corporation is making up the difference between the actual price and the price ceiling.
Based on the data provided by the NBS, the pump price for PMS in over ten states was above the fixed upper limit.
Sources: NBS, FBNQuest Research
The authorities maintain that there is no reason to raise the ceiling for the retail price. The transmission effects of a revision to reflect current fx rates would clearly be negative for consumption and therefore the broader economy.
