By Ogungbayi Adeyemi S. | adeyemi@ddnewsonline.com
Editor, DDNews |
Nigerian workers have been urged to demand a production-cost pricing model for petrol that could bring the pump price down to between N435 and N687 per litre, alongside the rehabilitation of the four government-owned refineries to deepen competition in the downstream petroleum market.
Petroleum engineer and economist, Prof. Izielen Agbon, at a virtual public discussion on Sunday organised by the Alliance on Surviving COVID-19 and Beyond (ASCAB), argued that pricing domestically-refined petrol based on production costs rather than international import parity would make fuel more affordable to workers and small businesses.
Speaking on ‘Working Class Solutions to PMS Price Increases and Fuel Subsidy Removal’, Agbon said the approach would require the Nigerian National Petroleum Company Limited (NNPCL) to utilise its domestic crude allocation for local refining, with its refineries serving as suppliers of last resort and providing a benchmark capable of exerting downward pressure on petrol prices.
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According to him, the production-cost pricing model would determine PMS prices from the cost of crude oil, refining, transportation, distribution and applicable taxes, rather than the international opportunity cost used under the import-parity model.
He said applying the model to the 445,000 barrels-per-day domestic crude allocation reserved for NNPCL refineries could result in a petrol price between N435 and N687 per litre at an exchange rate of N1,333 per dollar.
Agbon said a price of about N687 per litre would also enable NNPCL to become a price-setter and supplier of last resort in the domestic market, thereby increasing competition and challenging what he described as the oligopolistic influence of Dangote Petroleum Refinery.
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He explained that there are two basic methods for determining PMS prices — the production cost pricing method and the import parity pricing method. Under import parity, domestic petroleum prices reflect the cost of importing refined products, regardless of the cost of producing crude oil domestically.
He argued that the model discouraged domestic refining and weakened Nigeria’s comparative advantage as an oil-producing country.
Chairman of the event and human rights activist, Femi Falana, said the public discussion was necessary because of the hardship caused by the high cost of petrol following subsidy removal.
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APM Faults Okpebholo’s UK Comparison
For defending the prevailing price of petrol, the opposition Allied Peoples Movement (APM) has criticised Edo State Governor, Monday Okpebholo, demanding his resignation for an “insensitive response to the economic hardship confronting Nigerians”.
Okpebholo had, at an event in Edo State last Thursday, compared petrol prices in Nigeria and the United Kingdom, saying a litre of the product sold for more than N3,000 after conversion to naira.
The governor, who said he checked the price during a recent visit to London, argued that Nigerians were “doing very well” because petrol remained cheaper in Nigeria.
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But the APM on Saturday faulted the comparison, saying the nominal naira value of petrol in another country did not adequately reflect the commodity’s affordability for citizens.
The party said comparing pump prices without considering differences in income levels, purchasing power and living costs could give a misleading picture of the burden being borne by Nigerian households.
It accused Okpebholo of attempting to justify the hardship caused by rising fuel prices rather than addressing the concerns of citizens.
Olawepo-Hashim Promises Cheaper Crude for Local Refineries
Meanwhile, Accord Party presidential candidate, Dr. Gbenga Olawepo-Hashim, declared that under his administration, Nigerian refineries would have access to Nigerian crude oil at a strategic domestic price.
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Speaking at the weekend in Ilorin, Kwara State, during the Diaspora Dialogue on ‘Fuel Subsidy and the Politics of 2027’, Olawepo-Hashim said Nigeria’s greatest economic mistake had been to treat crude oil primarily as an export commodity.
“Nigeria has spent decades giving the world our crude and buying back the value created from it. Our Energy First policy will reverse that equation.
“Our crude is our strategic advantage. We will put that advantage behind Nigerian industry. Refining and petrochemical industries are a core part of our immediate industrialisation strategy as we aim to be the world’s most reliable energy source,” he said.
By Ogungbayi Adeyemi S. (Beedee)
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