The Petroleum Products Pricing Regulatory Agency (PPPRA) has said pump price of petrol may cost less in April, as the federal government has been able to save N2.6 billion in six weeks, owing to the new price modulation process.
Outgoing Executive Secretary of the Agency, Alhaji Farouk Ahmed, announced this while handing over to Mr. Moses Mbaba, General Manager Administration and Human Resources, on Thursday in Abuja.
Ahmed noted that as of February 3, 2016, about one month after the review of the pricing template of petrol, the country had saved N2.6bn as over-recovery on the product.
He stated that the decision on the review of the pump price of Premium Motor Spirit, PMS popularly called petrol, would be taken next month by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, after due consultation with stakeholders, and based on the price of crude oil in the international market.
Ahmed said, petrol price could be reduced in the future considering the fall in crude oil prices, but not until March when the Minister who is fair in his decisions will take the decision pragmatically.
He also revealed that due to the current state of over-recovery, the PPPRA was recovering some money from the Nigerian National Petroleum Corporation (NNPC) and oil marketers.
Ahmed also noted that as of February 16, 2016, the country recorded over-recovery of N13.81 per litre of petrol, stating that this meant that the landing cost of PMS was lower than the selling price by N13.81. However, as of the close of business on Thursday, the over-recovery had dropped to N11.74 per litre.
Ahmed explained that on instances of over-recovery, the PPPRA usually sends notes to affected marketers to refund the excess money to the government, adding that the fund was being kept in an account that was recently opened at the Central Bank of Nigeria.
“There is already an account with the Central Bank of Nigeria (CBN), which is managed by the Accountant-General of the Federation where all over-recovered funds are deposited.
“So, there is no question about where does the money from over-recovery goes into.”
He however added that the money made by the federal government in over-recovery, would be saved for rainy days – to subsidize petrol, when the prices spike again. Ahmed handed over to Moses Mbaba, the general manager, administration and human resources.
“As at the February 12, 2016, because we verify based on what was imported, about N2.6 billion has accrued to that account,” he said.
“The fund is still low because most of the cargoes arrived in December last year. The PPPRA has already communicated to the appropriate authorities that we are in the regime of over-recovery.
“Indeed as at Tuesday close of market, the subsidy on petrol was N13.81Kobo over-recovery. The PPPRA would now send a debit note to every marketer that falls within that bracket to refund the money to government.
“The fact is that whatever money that will be put into that account, one day, which is our hope that the price of crude oil will go up, there will be more revenue inflow to the Federation Account. The oil sector will benefit. That excess, before you go to the government for any intervention, you go to that account and pull some money and compensate.”
He, however, noted that the over-recovery might disappear if the price of crude oil rises by next month.
Ahmed stated that the process of the review of the pricing template would likely commence by March 15, 2016, and the committee to undertake the review would consist of all the stakeholders in the petroleum industry, including major and independent oil marketers as well as depot owners.
“The recent price modulation mechanism and review of the agency’s pricing template, which took effect from January 1, 2016, has ushered in the much-needed efficiency and cost-saving as far as subsidy payment exposure is concerned,” he said.
Ahmed is among the heads of government agencies that were disengaged on Monday and asked to hand over to most senior directors in the office.
The PPPRA is the agency of the Federal Government that regulates and fixes prices for petroleum products in the country.
The agency had late December 2015 stated that the pricing template for petroleum products would be reviewed occasionally to reflect fluctuations in the price of crude oil in the international market.