Thread by @LewdakrisHov

So the Federal Government of Nigeria 🇳🇬 has advised a reduction in the Recommended Retail Price (RRP) of Gasoline (Petrol) ⛽️ across the country from N145/litre to N125/litre effective today March 18, 2020.
#PetrolPriceReduction

Considering that Oil🛢 prices have lost over 50% of its initial selling price.

The budgetary benchmark for Crude Oil was pegged at $57/barrel while Brent Crude sold for as low as $23.50 today being March 18, 2020.
#PetrolPriceReduction

A lot of citizens believe that the price slash by the FG does not reflect the realities of the oil price crash affecting the global economy. Hence the N20 reduction in the RPP of petrol ⛽️ is not commendable as argued by the country’s citizens.

However, a lot of factors go into the pricing template employed by the Petroleum Products Pricing Regulatory Authority (PPPRA)to determine the price of the essential commodity that powers gasoline engines in cars, motorcycles and generators in Nigeria 🇳🇬

These parameters include the following - the landing cost which comprises the cost of the refined product from European refineries alongside freight (Cost & Freight).

This is the chief component which is a variable and fluctuates based on oil prices.
#PetrolPriceReduction

Prior to the present regime in which the NNPC became the sole importer of gasoline in the country, the PPPRA administered the Petroleum Support Fund and the pricing template was updated regularly to reflect the vagaries of oil price fluctuation due to global demand and supply.

This was used in computing under recovery commonly referred to as Subsidy. Since the product was heavily subsidized for Nigerian citizens as a Crude Oil producing nation. This was also applicable when @NNPCgroup become sole importer incurring losses in the process.

The PPPRA uses Rotterdam Barges Premium Gasoline 10 BPPM as the standard to compute the pricing template for petrol in the country.

It is also based on a moving average cost of product as quoted on Platts Oil Gram.

Cost & Freight is the one & only major component which varies in line with oil prices. Other cost component are fixed & include the following - lightering expenses (ship to ship transfer of product from mother vessel to daughter vessel to deliver to nominated coastal facilities

This costs about N2.75/litre. Other costs include @nigerianports Charges which is N0.84/litre, @nimasaofficial Charges which is N0.22/litre, Jetty Throughput Charge & Storage Costs at N2.60/litre as well as Financing Costs (using offshore funding which arrives) at N2.33/litre.

These fixed costs cumulate to N8.74/litre alongside cost and freight (which fluctuates) which cumulatively peg the landing cost of the product between N115 -N130 per litre since 2016.

Other distribution margins include - Retailers cost (N4.60 per litre)
Transporters Margin (N2.75 per litre) Bridging Fund and Marine Transport Allowance (N3.95 per litre) and other charges amount to N13.20 per litre.

The Pipelines and Product Marketing Company (PPMC) , a subsidiary of the @NNPCgroup sells petrol to the various oil marketers at an ex-depot price of N133.28 before today’s pronouncement.

The difference between the ex-depot price and the RRP is the cumulative margins of the various stakeholders in the petrol supply value chain in ensuring that the country has sufficient supply of the product in every nook and cranny.

The computation of the landing cost of petrol is computed based on the average PLATTS rate per metric ton (MT) multiplied by the official exchange rate of the naira against the dollar (pegged at N307/$) divided by the number of litres of petrol in a MT which is 1,341 litres

The last pricing template shared by PPPRA on March 6, 2020 shows the Cost & Freight of Petrol was pegged at $466.83/MT.
#PetrolPriceReduction

With the landing cost dropping from N117.6/litre to N99.4/litre as communicated by @NNPCgroup , a difference of N18.2 per litre, the PLATT average for petrol has dropped to $396.18/MT which is a 15% drop for the refined product.

It is imperative to understand that petrol is an imported product and although crude oil prices have dropped by almost 50%, it doesn’t necessarily apply for refined products. I hope I’ve been able to educate the underlying principle behind today’s #PetrolPriceReduction

@threadreaderapp kindly unroll this thread 🧵

@BBoason