The Federal Government has cautioned petroleum marketers against using profits from old fuel inventories purchased at higher prices as justification for keeping pump prices elevated, stressing that Nigerians should benefit from lower replacement costs as market conditions improve.

The warning was delivered during a stakeholders’ meeting on the cost-reflective pricing of Premium Motor Spirit (PMS), organised by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) at its headquarters in Abuja.

The meeting was attended by representatives of Dangote Petroleum Refinery, the Federal Competition and Consumer Protection Commission (FCCPC), the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), and other key players in the downstream petroleum sector.

Speaking at the meeting, the Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, said while several factors determine the retail price of petrol, marketers should not continue to base pump prices on temporary gains from inventories acquired when crude oil prices were significantly higher.

“I am aware that PMS pricing is influenced by several factors beyond crude oil prices, but it is equally important to distinguish between genuine replacement cost and windfall gains arising from inventory management.

“Temporary gains realised from inventories acquired at higher prices should not become the basis for sustaining elevated pump prices after replacement costs have declined. As inventories are replenished at lower costs, the benefits of those lower costs should be transmitted to consumers in a timely and transparent manner. That is the essence of a competitive and efficiently functioning market.”

Lokpobiri acknowledged that exchange rates, logistics and supply chain costs also contribute to fuel pricing, but maintained that the deregulation of the downstream sector was never intended to encourage excessive pricing or market distortions.

According to him, sustaining fuel prices above prevailing market realities could fuel inflation and erode the economic progress achieved in recent months.

“When the cost of energy remains elevated beyond what prevailing market conditions justify, the results translate to inflation. While considerable progress has been made in moderating inflation from the highs experienced in 2024, when inflation stood at 34 per cent, the latest figures show that inflation currently stands at 15.9 per cent. Sustaining high energy costs where underlying market fundamentals have improved risks undermining these gains and slowing down the recovery that Nigerians are beginning to experience.”

The minister explained that global crude oil prices climbed from between $61 and $65 per barrel in January to over $118 per barrel in April following geopolitical tensions in the Middle East before dropping to about $71 per barrel.

He said although the earlier surge in crude prices led to an increase in domestic petrol prices, the subsequent decline had not been adequately reflected at filling stations.

“Ordinarily, such movements in crude oil prices should be reflected in the pricing of refined petroleum products. While the initial increase in crude prices understandably exerted upward pressure on PMS prices, the subsequent moderation in crude oil prices has not translated into a commensurate reduction in pump prices across the domestic market.

“This disconnect has understandably raised concerns. PMS peaked at about N1,596 per litre in May and currently sells at around N1,296 per litre. While there has been some reduction, the adjustment has not been commensurate with the decline in underlying market conditions.”

Lokpobiri also praised the reforms introduced by Bola Tinubu, including the removal of fuel subsidy and the crude-for-naira policy, describing them as measures that have strengthened competition in the downstream petroleum industry.

He directed the NMDPRA to intensify monitoring of the market and ensure transparency in fuel pricing across the supply chain.

“I urge the Authority to strengthen market surveillance and enforce pricing transparency across the supply chain to ensure that reductions in underlying costs are reflected promptly in ex-depot and retail prices. Consumers should have confidence that prices are determined fairly and not by information asymmetry or anti-competitive practices.”

The minister further called for the swift operationalisation of the National Strategic Stock, saying it would improve the country’s energy security and help cushion future price volatility.

Earlier, the Chief Executive of the NMDPRA, Rabiu Umar, said the meeting was convened in response to growing public concerns over petrol pricing despite the decline in international market indicators.

“As a responsible regulatory authority, it is our duty to step in alongside you, our valued partners, to interrogate the market forces, understand the operational bottlenecks and directly address this disconnect between falling replacement costs and sustained retail prices. Deregulation is not a licence for market distortion or unfair consumer pricing. It is intended to drive efficiency, maximise value and protect the public interest.”

Umar said the objective of the engagement was not to fix prices but to collaborate with industry operators in identifying practical solutions that would protect consumers while ensuring the sustainability of businesses operating within the downstream petroleum sector. (Daily Trust)

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