Government cautions fuel sellers against inflating gasoline costs with leftover inventory

The Federal Government has cautioned petroleum marketers against using previously acquired expensive fuel inventories as a reason to maintain high petrol prices, emphasizing that the benefits of lower replacement costs must be passed on to consumers.

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The government expressed concern over the disconnect between falling international crude oil prices and domestic petrol prices, warning marketers against sustaining high pump prices despite declining global crude prices.

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A stakeholders’ meeting on cost-reflective pricing of PMS was held at the Nigerian Midstream and Downstream Petroleum Regulatory Authority headquarters in Abuja on Monday.

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The meeting brought together representatives of the Dangote Petroleum Refinery, the Federal Competition and Consumer Protection Commission, and the Petroleum Products Retail Outlets Owners Association of Nigeria, among other key players in the downstream petroleum sector.

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Chief executives and representatives of TotalEnergies, Eterna Plc, Matrix Energy Group, and other major industry stakeholders attended the meeting, along with officials of the NMDPRA.

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Minister of State for Petroleum Resources Senator Heineken Lokpobiri stated that temporary gains from inventories purchased at higher prices should not be used to sustain elevated pump prices after global oil prices have declined.

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Lokpobiri emphasized that as marketers replenish their stocks at lower costs, reductions in procurement expenses should be reflected promptly in ex-depot and retail petrol prices, in line with the principles of a competitive and efficient deregulated market.

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The minister acknowledged that petrol pricing is influenced by factors beyond crude prices, including exchange rates, logistics, and supply chain costs, but insisted that marketers must distinguish between legitimate replacement costs and extraordinary gains from inventory management.

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Lokpobiri stated that the Federal Government remains committed to protecting consumers in the post-subsidy era, stressing that deregulation is not designed to create opportunities for excessive pricing or market distortions.

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The minister warned that sustaining high energy costs could worsen inflationary pressures and undermine the gains recorded in moderating the country’s inflation rate.

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Lokpobiri urged petroleum marketers to immediately transmit the benefits of falling global crude oil prices to Nigerian consumers, warning that deregulation should not be exploited to sustain high petrol prices and generate windfall gains.

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His comments come amid growing public concerns over the slow pace of reductions in petrol prices despite the sharp moderation in crude oil prices in recent months.

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International crude prices traded between $61 and $65 per barrel in January before surging above $118 per barrel in April, but have since declined to around $71 per barrel.

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The minister noted that while the earlier rise in crude prices exerted upward pressure on petrol prices, the subsequent decline has not been reflected proportionately in domestic pump prices.

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Lokpobiri stated that PMS peaked at about N1,596 per litre in May and currently sells at around N1,296 per litre, but the adjustment has not been commensurate with the decline in underlying market conditions.

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The minister warned that keeping energy prices artificially high could worsen inflationary pressures and undermine the economic gains achieved by the government over the past year.

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Lokpobiri commended the economic reforms of President Bola Tinubu, saying the removal of fuel subsidy and other executive interventions had laid the foundation for a more competitive and investment-driven downstream petroleum industry.

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The minister directed the NMDPRA to intensify market surveillance and enforce pricing transparency across the downstream value chain.

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Lokpobiri called for the speedy operationalisation of the National Strategic Stock, describing it as a critical instrument for safeguarding national energy security and moderating future price shocks.

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Authority Chief Executive of the NMDPRA Rabiu Umar said the meeting was convened at the directive of the minister to address growing concerns surrounding petrol pricing and ensure Nigerians benefit from improvements in global market conditions.

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Umar recalled that a similar engagement with operators in the domestic gas sector had recently resulted in a noticeable reduction in liquefied petroleum gas prices, expressing optimism that the same collaborative approach could deliver results in the petrol market.

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The NMDPRA boss acknowledged that global crude prices had moderated significantly in recent weeks but lamented that the domestic retail market had yet to adjust accordingly.

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Umar emphasized that the objective of the meeting was not to dictate prices but to collaborate with industry stakeholders on practical solutions that would keep businesses viable while protecting consumers.

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The meeting has moved into a closed-door session involving key industry stakeholders, with a resolution expected to be issued at the end of the deliberations.