While Nigerians anticipate reduction in the price of fuel to relieve hardship, Robert Dickerman, Chief Executive Officer of Pinnacle Oil and Gas Limited has said Dangote’s oil production will not massively lower the price.
According to Dickerman, the root cause of fuel hike in Nigeria is the devaluation of naira in the global market.
He spoke during the Association of Energy Correspondents of Nigeria (NAEC) annual strategic international conference in Lagos.
The Pinnacle CEO noted that all crude oil and petroleum products are priced in United States Dollar (USD), all over the world since oil was first drilled in Pennsylvania in 1859.
“When we import products, whether the buyer is NTL or a private marketer, we must pay the global market price, adjusted for quality and location. That price is in dollars and must be paid in dollars. When it is re-sold in Naira by vessel, in bulk in a terminal, by truck at a gantry, or by pump at retail, the market price is the USD price, converted to Naira at the current FX exchange rate, which is currently about N1700.
“Any price below that is the result of Nigerian subsidy. The subsidy represents the difference between the market price and the selling price,” he explained.
Dickerman stated that every drop in the naira raises the cost of anything imported or market priced, whether gasoline, manufactured goods or food.
“We must address the root problem, which is how to restore global confidence in Nigeria’s economy and currency, create foreign investment in jobs and local production, increase tax revenue and achieve fiscal prudence! That is the only way to lower petroleum products prices in naira.”
Speaking on the state of fuel subsidy, the CEO pointed out that Premium Motor Spirit (PMS) is still subsidised by the government using discounted FX through the Nigerian National Petroleum Company Limited, NNPCL.
He said, “prices at wholesale and retail are still considerably below market. That is why only NTL has been able to import (buy high, sell low) and why only NTL can buy Dangote’s gasoline and pay market price, while reselling at a subsidized price. No marketer would stay in business trying to copy this model.
“Available crude for sale by NNPC has been steadily declining due to production challenges and actions taken to raise short term cash such as crude forward sales and crude collateralized on international loans, but also because of the fiscal constraints of the government, its increasing debt and the need to fund large subsidies such as for PMS and electricity.”