The Group Chief Executive Officer of the Nigerian National Petroleum Company Ltd, NNPCL, Mele Kyari, says the increase in the price of petrol from N537/litre to N617/litre on Tuesday is the result of interactions of market forces.
Kyari said this when State House correspondents sought to know from him, the cause of the increase after he met privately with Vice President Kashim Shettima at the Presidential Villa, Abuja.
Explaining that it was the marketing wing of the NNPCL that is responsible for adjustment of prices of petroleum products, Kyari said he did not have details of the latest price increase.
“I don’t have the details this moment. 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 market regulate itself so that prices will go up and sometimes they will come down also.
“This is what we have seen and in reality this is what the market works.”
No supply issue
Asked if the market forces he spoke about meant that there was shortage in supply of petrol in Nigeria, Kyari said that there was “no supply issue” in the country.
“When you go to the market, you buy the product; you come to the market you sell it at the prevailing market prices. It has nothing to do with supply.
“We don’t have supply issues; there is robust supply. We have over 32 days of supply in the country.”
Assuring Nigerians that the current deregulated market for petroleum products “is the best way to go forward,” Kyari said it would ensure that prices are adjusted when market forces come to play.
“Yes, what I know is that the market forces will regulate the market. Prices will go down sometimes; sometimes it will go up.
“But there will be stability of supply and I’m also assuring Nigerians that this is the best way to go forward so that we can adjust prices when market forces come to play.
“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.”
Open market
Also speaking, the Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority, NMDPRA, Farouk Ahmed said that the petroleum products market is open for participants and will determine itself.
“As a regulator, I told you back in May that we are not going to be setting 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 of course the profit margin by the importer.
“This market is deregulated; it is open to all participants, and as I mentioned also 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, September.
“Already, we received some cargoes from these markers: 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 to 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.”
Ahmed also stated that the price of crude also affects the price of products.
“When you say market forces are working, basically, 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,” Ahmed said.
