NNPC Ltd Affirms PMS Prices Governed by Free Market Forces Amidst Forex Challenges

The Nigerian National Petroleum Company Limited (NNPC Ltd) has reiterated that the prices of Premium Motor Spirit (PMS), commonly known as petrol, are determined by free market forces, emphasizing that the ongoing fuel price fluctuations are driven by market dynamics, including the influence of foreign exchange (forex) availability. This clarification comes amidst growing concerns over fuel scarcity and fluctuating prices across the nation.

Speaking on the widely watched TVC News program, “Journalists’ Hangout,” on Thursday, NNPC Ltd’s Executive Vice President of Downstream, Mr. Adedapo Segun, provided detailed insights into the factors behind the fuel scarcity and price variations. He pointed to forex illiquidity as a critical factor impacting PMS prices, which are no longer regulated by the government but instead fluctuate in response to market conditions. This new market reality is in accordance with the provisions of the Petroleum Industry Act (PIA), specifically Section 205, which governs the operations of NNPC Ltd.

Segun emphasized, “The market has been deregulated, meaning that petrol prices are now determined by market forces rather than by the government or NNPC Ltd. Additionally, the exchange rate plays a significant role in influencing these prices.” He further explained that the limited availability of foreign exchange has contributed significantly to the current fuel scarcity and price fluctuations, as importers struggle to source dollars for purchasing fuel at international prices.

Impact of Foreign Exchange on Fuel Prices

The deregulation of the PMS market, which was officially implemented following the passage of the Petroleum Industry Act, marked a major shift in Nigeria’s fuel pricing system. Historically, the government played a central role in fixing fuel prices, but under the new regime, prices are dictated by supply and demand forces. With the Nigerian economy grappling with forex shortages, particularly in the aftermath of the recent unification of the naira, the cost of importing petroleum products has surged. This, in turn, has led to the fluctuating prices being witnessed at fuel stations nationwide.

The devaluation of the naira has made it more expensive for marketers to source dollars to purchase fuel from international markets, a situation that has contributed to the rising cost of PMS. “The exchange rate is a major determinant of prices,” Segun said, adding that with the free market approach, global crude oil prices and the exchange rate directly impact the pump price of petrol in Nigeria.

Fuel Scarcity Expected to Ease Soon

Addressing the ongoing fuel scarcity, which has left many Nigerians queuing at petrol stations, Segun offered reassurance that the situation is temporary and will ease in the coming days. He explained that NNPC Ltd is working closely with fuel marketers and station operators to ensure that PMS is available across the country. Segun noted that the recalibration of pumps at many fuel stations is one reason for the delays in supply, but he emphasized that this would be resolved shortly.

“The current fuel scarcity is expected to subside in a few days as more stations recalibrate and begin selling PMS,” Segun said, adding that NNPC Ltd operates nearly 1,000 filling stations nationwide and is collaborating with private marketers to ensure that fuel is made available to meet consumer demand. He highlighted NNPC Ltd’s efforts to ensure that fuel stations open early and close late to maintain adequate supply and alleviate the long queues that have been forming across the country.

Additionally, Segun mentioned that NNPC Ltd is actively working to prevent fuel diversions, a common practice where products meant for local stations are sold on the black market or exported to neighboring countries for higher profits. He reassured Nigerians that the company is engaging with the relevant authorities to ensure that timely deliveries are made to all stations, and that measures are being taken to prevent product hoarding or diversion.

Dangote Refinery Set to Begin Lifting PMS

In a significant development, Segun provided an update on the anticipated commencement of fuel lifting from the Dangote Refinery, a major factor expected to bolster Nigeria’s fuel supply. According to him, NNPC Ltd is working closely with the Dangote Refinery and is awaiting the September 15th timeline provided by the refinery for the commencement of operations. Once the Dangote Refinery starts full-scale production and distribution of PMS, it is expected to significantly reduce Nigeria’s dependence on imported petroleum products and stabilize the country’s fuel supply chain.

The Dangote Refinery, which is the largest single-train refinery in the world, has the capacity to produce 650,000 barrels of crude oil per day, making it a key player in Nigeria’s efforts to achieve self-sufficiency in petroleum product supply. The refinery’s ability to meet a large portion of Nigeria’s PMS needs will likely reduce the impact of forex illiquidity on fuel prices, as the country will rely less on imported fuel.

“We are looking forward to the commencement of lifting from the Dangote Refinery, which should begin as per the timeline of September 15th. This will go a long way in stabilizing fuel supply across the country and ensuring that we meet the needs of Nigerians without relying heavily on imports,” Segun said.

Collaborative Efforts to Resolve Fuel Supply Issues

Segun acknowledged the frustration many Nigerians are facing due to the scarcity and price hikes but assured the public that NNPC Ltd is taking proactive steps to address these challenges. In collaboration with private marketers and regulatory authorities, NNPC Ltd is working to ensure that supply bottlenecks are resolved and that PMS is available at affordable prices. The executive also underscored the need for patience as the recalibration of fuel stations is completed, which is crucial for the accurate dispensing of fuel under the new pricing regime.

The deregulated market, while challenging in the short term due to forex fluctuations, is expected to benefit Nigerians in the long run by encouraging competition and attracting investment into the sector. With the Dangote Refinery set to come online and NNPC Ltd’s commitment to ensuring adequate supply, the outlook for Nigeria’s PMS market remains optimistic.

NNPC Ltd’s leadership is also working to address the structural challenges that have historically plagued the petroleum sector, including product diversion and supply chain inefficiencies. Segun emphasized that the current difficulties are being tackled head-on, and he remains confident that normalcy will return to the PMS market shortly.

Conclusion: Market Forces in Control

In line with the provisions of the Petroleum Industry Act, the deregulation of Nigeria’s petroleum sector means that PMS prices are now governed by the forces of supply and demand. While this transition has led to some initial challenges, particularly in the face of forex shortages and fuel scarcity, the NNPC Ltd remains optimistic that the situation will stabilize soon. The commencement of operations at the Dangote Refinery and ongoing efforts to improve supply chain efficiency are expected to bring relief to Nigerian consumers in the weeks ahead.

As Nigerians adjust to the realities of a deregulated fuel market, NNPC Ltd’s continued focus on collaboration with marketers, recalibration of stations, and prevention of product diversion will be crucial in maintaining a steady supply of PMS and ensuring that fuel prices remain competitive in the long term.