Fuel Price Jack-up: Deconstructing Tinubu/Kyari’s Petrol Pricing Template

President Bola Ahmed Tinubu, on Monday May 29 2023, in his inaugural address at Eagle Square, Abuja, declared that there would no longer be a petroleum subsidy regime as it was not sustainable.

And barely 48 hours from that, Kolo Mele Kyari, the Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL) followed with his own announcement of an upward review in the pump price of premium Motor Spirit (PMS) popularly called petrol, saying the increase takes effect that same day, Wednesday, 31 May and that it was in line with current market realities.

The first announcement by NNPCL sounded more like a directive to all marketers to sell at the new price though this was later corrected to say the new regime is to be used only by NNPC’s retail outlets.

The NNPCL circular had it that the petroleum pump price adjustment for the Abuja pump price was increased from N194 to N537 per litre, while Nassarawa moved from N189 to N537 per Litre.

The pump price for Plateau increased from N189 to N537 per litre, while Kwara was increased from N189 to N515 per litre.

The pump price in Kogi was increased from N189 to N537, Benue increased from N189 to N537, Niger state was increased from N189 to N537, Adamawa was increased from N199 to N550 per litre, and Taraba was increased from N199 to N550 per litre.

The pump price in Bauchi increased from N199 to N550, Gombe increased from N199 to N550, and Borno increased from N199 to N557.

Yobe was increased from N199 to N557, and Kano increased from N194 to N540. A litre of petroleum in Kaduna was increased from N194 to N540, and Katsina from N194 to N540. Sokoto increased from N194 to N540, and Jigawa increased from N194 to N540. Kebbi state moved from N194 to N545. Zamfara moved from N194 to N540. The pump price of petroleum moved from N189 to N515 in Abia, and Imo increased from N189 to N515.

Anambra was increased from N189 to N520, Enugu from N189 to N520 and Ebonyi was also increased from N189 to N520. Rivers from N189 to N511, Akwa Ibom moved from N194 to N515, and Bayelsa from N189 to N515.

Cross River was moved from N194 to N511, Edo from N189 to N511, Delta moved from N189 to N511, and Lagos was increased from N184 to N488, Ogun, Oyo, Osun, Ondo and Ekiti was increased from N189 to N500.

According to the National Bureau of Statistics, petrol was sold for an average of N254.06 per litre in April 2023. On 29 May 2023, after the speech, it sold for as high as N550, with speculations of prices going as high as N750 in the coming days.

The question is: how did NNPCL arrived at the figures dished out as the appropriate pricing of the product across the country?

Is it not curious that NNPCL never gave any rational data when it single-handedly fixed the new pump price at over N500 per litre from N198 per litre? It did so a mere 48 hours without any public debate after the President’s announcement that “fuel subsidy is no more”.

Let’s look at the facts of the matter: Based on Tinubu’s speech, not much changes in the pricing template — just the subsidy bit is removed. Recall that in 2016, when the first subsidy removal was implemented by the Muhammadu Buhari administration, the Petroleum Products Pricing Regulatory Agency (PPPRA) released its new pricing template, which showed that two components make up the petrol price under the absurd Nigeria’s 100 percent dependence on fuel imports for its domestic needs: landing cost and distribution cost.

Here is how petrol pricing works under the peculiar situation the nation has found itself as explained by experts: At the time the landing cost of one litre of petrol was N119.74, while the distribution cost was N18.37 per litre, the total pump price was N138.11.  The PPPRA mandated fuel stations to sell between N135 to N145 per litre. Here, there was zero subsidy!

In 2023, the landing cost and the distribution cost have changed as the sole importer made us believe, but the biggest change has been in the structure of the state oil company, which has now become NNPC Limited, and no longer has the absolute power to fix prices. The distribution cost today should be about N30 to N35 per litre, while the landing cost is where the conversation or rather the fraud is.

The NNPC’s landing cost when the last PPPRA template was published in 2021 was $561.96 per metric ton. Today, this price is between $680 and $750 per metric ton as claimed by the NNPC which has enjoyed both import monopoly of petrol and the subsidy largess thereof for over five years. So from the company’s data, this should naturally bring the new landing cost per litre to N266 per litre. Add distribution cost, the expected pump price should be N296-N300 per litre without subsidy.

So how did Kyari arrived at the over N500 per litre he is asking us to pay at the company’s retail outlets meaning that the prices will be far higher at outlets owned by private marketers both major and independents?

Why must Nigerians be made to pay N530 or more per litre of petrol for any quality of the product, because NNPCL which is a monopoly and now a private company said so?

Late Aret Adams former GMD of NNPC unequivocally said the deregulation of petrol business must not necessarily translate to consumers paying more per litre. Please check Newswatch of March 2001. No successor to his office has disproved him, even as we speak.

And late Prof Tam David West who served as Nigeria’s Petroleum Minister 1983-1985, under Gen Muhammadu Buhari and stood out as OPEC’s wonderkid at the time, laboriously “unbundled” the headache prone data in the confusing product -to- market formula which old NNPC hitherto used to argue its case with. He turned the transaction data into an easy to grasp arithmetic. No one has countered the foundational data and logic presented by Tam David-West of blessed memory.

Recall that this same Bola Tinubu challenged the claim of the existence of anything subsidy in the first instance in a letter he published in Jan 2012 to contest President Goodluck Jonathan’s administration proposal to raise pump price of petrol

Tinubu said the pump price of petrol in Nigeria should be about N40 per litre.

Interestingly, this same Tinubu who is now the President of the Federation has become deaf and dumb now over this Kyari’s broad daylight rebranding of the subsidy scam. That’s Nigeria for you

Now the President is coming out with his proposed N500 billion subsidy palliative which at best is another big fraud between him and the NNPCL boss. Where is the money going to come from when we have established that there was no subsidy in the first instance? The phantom subsidy was a convenient public finance heading, used to settle political cabals and cronies.

If such cabals and cronies are taken off the juice from the fuel pumps, let’s first be sure that new cabals have not simply cornered the new pump price per litre which appears designed to create an equally huge windfall for a few. This matter is going to hunt Tinubu throughout his stay at Aso Rock. Mark my word

(IFEANYI IZEZE writes from Abuja: [email protected]; 234-8033043009)