Daily Insight: PMS remains above fixed upper price limit

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The National Bureau of Statistics (NBS) recently released its Premium Motor Spirit (PMS) or Petrol price watch for September 2018. According to the report, the average price of PMS across the country increased 1.9%y/y and 0.3% m/m from N146.9 in August to N147.3 in September. States with the lowest prices include Kano (N144.9), Katsina (N143.6) and Bauchi (N144.0), while the highest prices were obtainable in Enugu (N153.9), Taraba (N152.9) and Delta (N150.9).

Brent – against which Nigeria’s crude oil is priced, is currently trading above $80/bbl and this essentially continues to widen the spread between the landing cost of PMS and the fixed price of N145/liter. This has resulted in the accumulation of an under-recovery (a form of subsidy payment) in the book of the NNPC worth N306.2bn from Jan-18 to May-18. Accordingly, we suspect a post-election adjustment in PMS price in 2019/2020, regardless of who the winner is.

While improved utilization rates at existing refineries and the soon to completed 650,000 b/d Dangote refinery should help reduce importation, we are of the view that the medium to long-term outlook of PMS price remains at mercy of sound and holistic regulatory reforms.