Is PMS Price Deregulation for Real or a Mirage?

Must Read

How To Block Your Bank Account And SIM Card In Case Of Emergency

Losing your phone and wallet or having them stolen can be very frustrating. However, in case that happens to...

List of First Bank of Nigeria Sort Codes in Nigeria

The sort code is a number that usually identifies both the bank and the branch where an account is held. The sort...

List of United Bank for Africa (UBA) Sort Codes & Branches (with addresses) in Nigeria

The sort code is a number that usually identifies both the bank and the branch where an account is held. The sort...
- Advertisement -

The Federal Government recently announced a N5 reduction in the pump price of fuel, effective December 14.

This has raised eye brows on who controls the price of petroleum products…the government, the market, or the unions? Is the market deregulated or not? If yes, why is there still government intervention especially at a time when Brent crude is in contango – a situation where the spot price is higher than the future price?

Is PMS Price Deregulation for Real or a Mirage?

The deregulation of the downstream petroleum sector and the removal of subsidies on refined products especially PMS has been a subject of controversy in Nigeria for years. In Q1, the FG announced the approval of the deregulation process and in April, the price of PMS was allowed to  slide in tandem with the fall in crude oil prices.

Brent crude averaged $26.63pb in April compared  to $63.68pb recorded in January. Since then, marketers have begun pricing petroleum products to  reflect global oil price trends, exchange rate and refining costs. The price of PMS now varies both intra and interstate.

- Advertisement -

The negotiation with labor unions and stakeholders on price determination is not part of a deregulated market. The price needs to be a product of crude petroleum price, exchange rate and refining costs.

Read Also:  Mambilla Hydro Power: Taraba Govt Flags Off Sensitization Program

Implications

The possible decline in PMS price courtesy of interventions by the Federal Government and unions  could increase investor pessimism. This has serious implications for future investments in the petroleum industry as it signals that the market is not fully deregulated.

Read Also:  Anticipation rises for iPOWER Week

In the near term, marketers would not be in a hurry to adjust their pumps and implement the down-  ward revision in petrol price. This is because prices are sticky downwards and marketers/distributors  typically respond faster to a price increase than decrease.

If the government and unions insist on the  change, there could be artificial scarcity of petrol as marketers refute the decline (on the premise that  global oil prices are increasing) and may decide to hoard the commodity. Brent is currently trading  around $48-$49pb on covid-19 vaccine rollouts in the US and UK and a recovery in Asian fuel demand.

- Advertisement -

In addition, higher crude oil prices are positive for export earnings but could however mean another  increase in the price of petrol to N170-N180/litre. This coupled with the cost reflective electricity  tariffs and low income levels could further erode consumer disposable income.

- Advertisement -
Is PMS Price Deregulation for Real or a Mirage? - Brand SpurIs PMS Price Deregulation for Real or a Mirage? - Brand Spur

Subscribe to BrandSpur Ng

Subscribe for latest updates. Signup to best of brands and business news, informed analysis and opinions among others that can propel you, your business or brand to greater heights.

- Advertisement -

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Is PMS Price Deregulation for Real or a Mirage? - Brand SpurIs PMS Price Deregulation for Real or a Mirage? - Brand Spur

Latest News

GTBank Shareholders Endorse N3.00 Total Dividend for 2020, Applaud Agbaje’s Leadership

Shareholders of Guaranty Trust Bank (GTBank) Plc, at the weekend unanimously endorsed the payment of a total dividend of...
- Advertisement -
BrandsPur Weekly Cartoons
- Advertisement -Is PMS Price Deregulation for Real or a Mirage? - Brand SpurIs PMS Price Deregulation for Real or a Mirage? - Brand Spur