Petrol Sales Drop 40% Since Price AdjustmentTo N145 – Forte Oil Plc, CEO

By Ejiofor Alike and Obinna Chima
Following the recent adjustment of the price of petrol to N145 per litre by the federal government, sales of the product have drastically reduced by about as much as 40 per cent, according to the Chairman, Major Oil Marketers Association of Nigeria (MOMAN) and Group Chief Executive Officer of Forte Oil Plc, Mr. Akin Akinfemiwa.
It also emerged yesterday that as the National Bureau of Statistics (NBS) prepares to release inflation figure for May 2016 next week based on the bureau’s data release calendar, the Consumer Price Index (CPI) has been predicted to hit 14.7 per cent.
Akinfemiwa revealed that though Nigeria is a driving country with a lot of dependence on petrol for both passenger and commercial vehicles, there are strong indications that motorists have devised various means of using less petrol in view of the high cost.
He confirmed this development in a statement at the weekend, stating that as the foremost indigenous energy solutions provider, his company’s customer surveys showed that motorists had resorted to various journey-planning initiatives to reduce fuel usage.
He identified some of the initiatives to include; “car-pooling, use of government mass transit buses and even cutting down on unnecessary movements and visits”.
“If you may agree with me, there has been a light flow of traffic in the Lagos metropolis in very recent times. We however deem this to be the initial reaction and thus believe that the demand will improve over time,” he added.
Akinfemiwa insisted that marketers would continue to clamour for deregulation, saying that the recent price adjustment was not deregulation.
“The clamour is still on and the market is not deregulated as we speak. What we have is an adjustment of the foreign exchange line items on the modulated template to approximately N285 per naira from the Central Bank of Nigeria’s N197 rate previously used. However, we view this as a significant achievement and departure from the subsidy regime in which petroleum product imports accounted for over 50 per cent of Nigeria’s foreign exchange earnings leaving very little headroom for spending on social infrastructure,” he explained.
According to him, the over-dependence on the CBN window at the time implied that marketers were stifled with respect to import volumes and hence various supply outages at the time.
He said the industry would continue to work towards the full deregulation of the downstream sector and allow the customer benefit from the overall efficiencies.
“ In addition, the new pricing structure would create a more structured approach for the operations of the downstream sector with a reduced dependent on NNPC by all marketers for petroleum products supplies as we now go and source ourselves. I am aware that some Major Marketers have been approached by some independent marketers for integration and absorption as some of these independent marketers may not have the scale required to operate in the days to come. This is the beauty of this new structure and it shall be to the ultimate benefit of the consumers,” he explained.
The MOMAN boss noted that the foreign exchange constraints are still there and recalled that when the price adjustment was made, there was an allusion to a secondary foreign exchange market.
“But I am aware that the authorities are finalizing modalities for this and should be implemented in the coming days. There are sufficient petroleum products from both the NNPC and the Major Marketers pending the implementation of this policy,” he added.
Inflation Projected to Hit 14.7% in May…
Meanwhile, as the National Bureau of Statistics (NBS) prepares to release inflation figure for May 2016 next week based on the bureau’s data release calendar, the Consumer Price Index (CPI) has been predicted to hit 14.7 per cent.
The Economic Intelligence Group of Access Bank Plc in a report yesterday forecasted headline inflation for May to increase to 14.7 per cent from the level of 13.7 per cent.
Also, in a separate report yesterday, the Financial Derivatives Company Limited (FDC) also estimated a spike in year-on-year inflation to 14.5 per cent in May.
Access Bank’s Economic Intelligence unit based the methodology they adopted in arriving at the projection on an autoregressive analysis of past prices, while recognising all the assumptions used by the National Bureau of Statistics (NBS) in its computation of monthly composite consumer price index (CCPI).
According to them, the expected upward momentum in headline inflation in May reflected increases in both food and core components of inflation, adding that with a 51.8 per cent weighting in the inflation basket, the food component has been responsible for a sizeable amount of overall price pressure.
Specifically, increases in the prices of cereals, fruit, meat, fish, dairy, tubers, tomatoes, and vegetables were expected to be the main culprits behind the anticipated CPI acceleration.
“The review of petrol pump price is likely to have mounted further pressure on May inflation numbers, driven by the transport component and the electricity, gas and other fuels components, which together contribute 23.2 per cent to the CPI weighting.
“Continued weakness in the naira, following the announcement of the deregulation of the downstream petroleum sector has also placed significant pressure on the inflation rate. This will have filtered into consumer prices as some firms may have sourced scarce foreign exchange from the parallel (black) market to import intermediate goods to maintain operations,” the report added.
Also, rising inflation is expected to throw real returns for investors further into negative territory while bond yields will likely nudge higher as Investors will want to be compensated for rising prices and inflation.