Monday, April 25, 2016 11:17AM/ FBNQuest Research
Earlier this month the National Bureau of Statistics (NBS) released its latest report in its premium motor spirit (PMS) price watch series. It shows the average monthly prices for PMS (petrol/gasoloine) paid by households across the country.
In March this averaged N135.7/litre (l) for the 36 states of the federation and the FCT, and so well above the fixed retail pump price of N87/l set by the previous administration.
The average price of gasoline in March represented a 31% y/y increase from the corresponding period in 2014. Nassarawa State had the highest price for PMS (N167/l) while Borno State had the lowest (N87/l). Meanwhile the prices in Lagos State and the FCT were N90/l and N105/l respectively.
The impact on general price levels was observed in headline inflation, which rose from 11.4% y/y to 12.8% in March. The persistent fuel shortages were a major factor in pushing up transportation costs.
The March inflation report showed that transportation prices rose by 17.3% y/y, compared with 15.7% recorded in February. This component has a 6.5% weighting in the index.
The fx sourcing challenges have led to the severe fuel shortages in the country. The Nigerian National Petroleum Cooperation disclosed that an average of US$1.8bn is spent on the importation of PMS on a quarterly basis.
The Petroleum Products Pricing Regulatory Agency (PPPRA) shows an expected open market price for PMS for April of N96/l, indicating a subsidy cost of N9.0/l.
The fuel crisis could soon start to ease now that the minister of state for petroleum, Emmanuel Ibe Kachikwu, has disclosed that the upgrade and repairs of domestic refineries have begun.
The current capacity utilisation of these refineries is 60%; the NNPC looks to achieve 90% in the medium term. Investment of US$700m will be required to attain this target.