Average PMS price now slightly above the 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 the month of July 2018. According to the report, the average price paid by consumers across the country for PMS decreased by 0.9% m/m to settle at N146.8, inching closer to the upper regulatory limit compared to the huge spread observed from Dec-17 to April-18. States with the lowest prices include Oyo (N144.7), Katsina (N144.1) and Gombe (N142.8), while the highest prices were obtainable in Borno (N155.0), Taraba (N151.8) and Bayelsa (N151.7).

Though the current PMS level marks the sixth consecutive decline since Jan-18, it remains above the recommended pump price of N145/litre, on the backdrop of an above $70/bbl crude price and an average Naira exchange rate of N305/litre, which suggests that PMS supply may remain pressured.

In light of the aforementioned, we expect average pump prices to continue to hover around the regulatory price of N145/litre or inch closer amid regulatory controls, reliance on importation, poor utilization rates at the existing refineries, and protracted completion date for the 650,000 b/d Dangote refinery which has been pushed forward to 2020/2022. This also implies that the NNPC will continue to cover the excess of landing cost on regulatory price as crude prices continue above
$70/bbl.

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