Petrol marketers to gain N8.3bn on depot price reduction

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Retail marketers of petrol are currently raking in billions of naira as findings showed that they would make over N8.3bn profit in May (this month) due to the recent reduction in the ex-depot price of the product.

On May 6, the Nigerian National Petroleum Corporation announced a reduction in the ex-depot price of petrol from N113.28 per litre to N108 per litre.

Ex-depot price is the price at which depot owners sell petrol to retail outlets in Nigeria.

Marketers and consumers had expected the Petroleum Products Pricing Regulatory Agency to review the commodity’s pump price downward but this never happened.

The PPPRA had in March promised that it would be reviewing petrol price monthly based on global crude oil market fundamentals.

However, it reviewed petrol price on April 1, when it announced N123.5/litre and N125/litre as the lower and upper price bands for the commodity.

Data obtained from the PPPRA Abuja showed that since the N25.28 reduction in the ex-depot price of petrol and PPPRA’s silence on price review, marketers had been making larger profit margins.

An analysis of petrol pricing templates from January to April showed that the difference between the ex-depot price for collection and real ex-depot price was N7.65/litre.

According to the PPPRA, the ex-depot price for collection was a summation of the real ex-depot cost, bridging allowance, marine transportation allowance and administrative charge.

It was gathered that the N7.65/retailers profit margin was the difference between the ex-depot prices and the lower/higher bands of petrol pump price.

Retailers profit margins differ across the country, however, while adding their profit, the cost must not exceed the higher price band specified by the PPPRA.

Adding the N7.65 to the current N108 ex-depot price that was announced on May 6 brings the actual cost of PMS to about N115.65/litres.

The commodity is dispensed at most filling stations at N125/litre, meaning oil dealers have been making about N9.35 on every litre of petrol sold nationwide.

According to the NNPC, in its most recent report on petrol consumption, Nigerians consumed 38.65 million litres of petrol daily in January.

With a daily consumption of 38.65 million and a profit of N9.35/litre, the marketers will make about N8.3bn for 23 days in May, beginning from May 7 when the N108/litre ex-depot price announced by NNPC took effect.

Oil marketers, however, had stated that it was not their responsibility to determine petrol price and noted that they would continue implementing the April 1 rate announced by the PPPRA.

The National President, Petroleum Products Retail Outlets Owners Association of Nigeria, Billy Gillis-Harry, had stated that the non-reduction in petrol price was not the fault of marketers.

“When a government organisation reduces the ex-depot price and you are not telling the buying public the approved band for the pump price at filling stations, you are trying to set us the retail outlet owners against the Nigerian public,” he said.

Gillis-Harry added that since there was no directive on approved lower and higher rates, it could mean that the NNPC left the pricing in the hands of marketers even though it was not their call to make.