The Nigerian Midstream and Downstream Petroleum Regulatory Authority, NMDPRA, has identified crude oil sourcing, domestic refining arrangements, logistics and transportation costs as major factors influencing petrol pump prices in Nigeria.
The Head of Public Affairs at NMDPRA, George Ene-Ita, disclosed this in an interview with the News Agency of Nigeria in Abuja.
Ene-Ita described the factors affecting fuel prices as complex, saying the complete deregulation of petrol pricing meant that market-related changes would be reflected in the cost of products.
He said crude oil sourcing and the time between the procurement of crude and its arrival at refineries were important components of the pricing process.
Crude sourcing affects product cost
According to Ene-Ita, refiners must account for the cost of sourcing crude oil as feedstock.
The price and availability of crude can influence the cost of producing petrol, diesel and other refined petroleum products.
Where crude is sourced offshore, the time between procurement and delivery to a refinery can also affect the final cost.
Changes in international crude prices, shipping charges, insurance and other supply-related expenses may therefore influence the price at which refined products are sold.
The regulator said these factors must be considered within the pricing structure of a deregulated market.
Logistics and transportation costs
Ene-Ita also identified marine and inland taxes associated with the movement and supply of petroleum products as factors that contribute to pump prices.
The transportation of fuel from refineries, storage facilities and depots to retail stations involves several costs.
These may include marine transport, trucking, road maintenance charges, storage, handling and other logistics expenses.
Where transportation costs increase, the additional expenses may eventually be reflected in the retail price of petrol.
Nigeria’s large geographical spread and inadequate transport infrastructure can make fuel distribution particularly expensive in some areas.
The cost of moving products from coastal import terminals or refineries to inland markets may also vary depending on distance, road conditions and availability of supply routes.
Deregulation exposes market movements
Ene-Ita said petrol prices had been completely deregulated and were therefore subject to market volatility.
“This issue is knotty in the sense that there are various factors involved,” he said.
He added that all supply-related volatility had to be factored into the pricing of petrol.
Deregulation means that petrol prices are influenced by market conditions rather than being fixed entirely by government subsidy arrangements.
Under the current framework, changes in crude prices, foreign exchange conditions, refining costs, transportation expenses and supply availability can affect the amount consumers pay at filling stations.
Domestic refining and supply stability
The explanation comes as Nigeria continues to expand domestic refining capacity and reduce dependence on imported petroleum products.
Domestic refining is expected to improve supply security and reduce exposure to international shipping and import costs.
However, local refineries must still secure crude feedstock, maintain operations and transport refined products to markets across the country.
The availability and price of crude supplied to domestic refineries therefore remain important to the stability of the downstream market.
The development of a more integrated petroleum value chain could help reduce some of the costs associated with importing refined products.
However, the benefits will depend on reliable crude supply, efficient refinery operations, adequate storage and distribution infrastructure.
For consumers, the immediate concern remains the effect of market volatility on household budgets and business operating costs.
Petrol prices influence transportation, food distribution, logistics, manufacturing and many other economic activities.
The NMDPRA’s explanation highlights the interconnected factors that shape fuel prices and the need for greater transparency across the petroleum supply chain.
