The Federal Government has hiked the price of Household Kerosene (HHK) to N83 per litre, 66 per cent increase from N50 per litre and thus officially scrapping subsidy on the product.
The Petroleum Products Pricing Regulatory Agency (PPPRA), on its product pricing template at the weekend, clarified that the N83 per litre price applies only to the Nigerian National Petroleum Corporation (NNPC), meaning that other petrol stations and dealers can sell higher than the stipulated amount.
Curiously, the hike in the price of kerosene came at a time when the price of crude oil has dropped to record low, with the price of petroleum products, such as kerosene, fuel and diesel, among others, dropping significantly in a number of countries, like the US.
The price hike also brings into question, the recent marginal reduction in the price of Premium Motor Spirit announced by the Federal Government which took effevt from the beginning of the year.
Again, the PPPRA’s template also showed that at N83 per litre, the Federal Government is making a gain of N10.72 for every litre, as it puts the Expected Open Market Price, which is the Landing Cost plus Total Margins at N72.28 per litre. The expected open market price is the prevailing open market rate for the product in Nigeria, after taking all major costs into consideration.
Giving a breakdown of the price, the PPPRA template put the Landing Cost of the product at N57.98 per litre, while the total margin due for middlemen was put at N14.30.
Further breakdown of the Total Margins showed that retailers’ margin is N5 per litre; transporters, N3.05 per litre; dealers, N1.95 per litre; bridging fund, N5.85 per litre; marine transport average, N0.15 and admin charges, N0.15.
PPPRA further put official ex-depot price, which is the price depot owners would sell to marketers, at N68.70 per litre, official ex-depot price for collection, N73 per litre while ex-coastal price is N68.02 per litre.
Late December, PPPRA on behalf of the Federal Government announced that effective January 1, 2016, Premium Motor Spirit, otherwise known as petrol, would be sold at N86 per litre by Nigerian National Petroleum Corporation (NNPC) retail stations, while other oil marketers would sell at N86.50 per litre.
Executive Secretary of PPPRA, Mr. Farouk Ahmed, who made the announcement, said the reduction in the price of the commodity was due to an implementation of the revised components of the Petroleum Products Pricing Template for PMS and household kerosene.
According to him, the revised template, which would be reviewed quarterly, is geared towards ensuring an efficient and market-driven price that would reflect current realities.
He said: “Since 2007, while crude oil price had been moving up and down, the template remained the same. This had made it necessary for us to introduce a mechanism whereby the template would be sensitive to the price of crude oil.
“However, the template is not static, as there would be a quarterly review and if there is any major shift, the Minister of State for Petroleum Resources would be expected to call for a review, either upward or downward, depending on the market condition.“
-Vanguard