* Say 56 marketing companies secure importation license
The Nigeria National Petroleum Corporation Limited (NNPCL) has reacted to the sudden increase of fuel pump prices from N540/liter to N617/liter, saying its merely the market forces at play
Group Chief Executive Officer of NNPCL, Mele Kyari explained on Tuesday, after meeting with the Vice President, Kashim Shettima at the Presidential Villa Abuja.
According to Kyari, the problem is not a shortage of supply of products, ratheproductsorces of demand and supply in the marketing value chain were simply taking effect.
He said importers of fuel products were gaining confidence in the system, noting that prices were bound to go up or down from time to time.
Kyari briefly had a chat with reporters, saying, “I don’t have the details this moment. But we have the marketing wing of our company. They adjust prices depending on the market realities.
“This is really what is happening; this is the meaning of making sure that the market regulates itself so that prices will go up and sometimes they will come down. This is what we have seen and in reality, this is how the market works”.
Asked if there was a shortage of products in the market to have warranted the increase, he responded by saying, “No. there is no supply issue completely. When you go to the market, you buy the product; you come to the market you sell it at the prevailing market prices. Nothing to do with supply shortage, we don’t have supply issues. There is a robust supply. We have over 32 days of supply in the country.
“Yes, what I know is that the market forces will regulate the market. Prices will go down sometimes; sometimes they will go up. But supply will be stable and I am also assuring Nigerians that this is the best way to go forward so that we can adjust prices when market forces come to play.
“I don’t have the details at this moment, but I know that our marketing wing acts just like every other company in this business. I know that several companies have imported petroleum products today. So, many of them are online. I’m sure my colleague would confirm this. Market forces have started to play; people have started having confidence in the market. Private sector people are importing products, but there is no way they can recover their cost if they cannot take market reflective cost”.
Corroborating the NNPCL Chief Executive, Farouk Ahmed, CEO, of the Nigerian Mainstream and Downstream Petroleum Regulatory Authority (NMDPRA) debunked insinuations that the new price adjustment was set by the NNPCL.
His words, “As a regulator, I told you back in May that we are not going to be setting the price. The market will determine itself and as you saw back in early June when prices came out, it was based on the cost of importation plus other logistics of distribution and course the profit margin by the importer. This market is deregulated; it is open to all participants.
“As I mentioned yesterday when I was in Lagos, we have about 56 marketing companies that applied and obtained licenses to import. Out of those, 10 of them have indicated to supply within the third quarter, which is July, August, and September.
“Already, we received some cargo from these marketers: Prudent Energy, AYM Shafa, and Emadeb. Emadeb Cargo is arriving tomorrow. So, this is just an encouragement to see that the market is liberated and everyone is free to import so long as you are working within the framework, especially in terms of quality. But on pricing, as a regulator, we are not going to put a cap on the price because we are not part of those importing. We are not a marketing company; we are just a regulator.
“So, when you say market forces are working what it is that you buy; you consider the price of crude going up. A couple of weeks ago, the price of crude was hovering around $70/barrel.
“Now it’s hovering around $80/barrel. So, the crude price also drives the product price. You know, because the importers are importing, they are basing it on the cost of importation plus the freight and other cost elements in terms of local distribution.”
