Nigeria has officially deregulated prices of petrol, following approval from regulator Petroleum Products Pricing Regulatory Agency (PPPRA).
The agency said the price cap per litre had been removed, as of June 3, and that a “market-based pricing regime” for petrol, known as premium motor spirit (PMS), would come into effect.
The PPPRA said it would monitor trends in the market and advise Nigerian National Petroleum Corp. (NNPC) and marketing companies of the market-based price. The price advised by PPPRA would be “the guiding retail price at which the product shall be sold across” Nigeria.
In March, the PPPRA said the new regime should create more transparent pricing and stimulate investment in the downstream sector, while encouraging the “resumption of products importation by Oil Marketing Companies (OMCs)”, which should create jobs as depots and facilities are brought back into action.
The agency has also talked of plans to develop an alternative fuels market, in the medium term, which would see LPG and compressed natural gas (CNG) used in vehicles in the country. In May, the PPPRA was reported as saying it had granted a number of licences to private companies for imports.
According to the Nigerian National Bureau of Statistics (NBS), prices of petrol in Nigeria averaged 130.8 naira ($0.34) per litre in April, down 10% from the previous month.
The PPPRA had set the price of petrol for April at 123.5 naira ($0.32) per litre. The agency cut its price to 121.5-123.5 naira ($0.31-0.32) per litre at the end of May.
A note from CSL Research noted that it would be impossible for marketers to sell at the lower end of the price band. Given that the landing cost of petrol is driven by international crude prices, CSL said, there is likely to be “upward pressure on the cost of importing petrol”.
Those companies that have begun importing petrol recently may stop “once again if domestic retail prices become unfavourable”, CSL said.