Refiners back forward crude sales, oppose petrol price cap

The Crude Oil Refiners Association of Nigeria (CORAN) has endorsed the Federal Government's proposal to sell crude oil to domestic refineries through forward contracts, but raised concerns over imposing a petrol price cap without addressing how costs exceeding the limit would be recovered. The association believes forward sales could ensure feedstock security and mitigate exposure to fluctuating international oil prices, but emphasized the necessity of transparency, commercial viability, and equal access for all local refineries.

Meanwhile, petrol prices in Abuja have risen to approximately N1,410 per litre, surpassing the government's proposed N1,350-per-litre ceiling on the ex-gantry or landing cost of the product. The Nigerian government is currently negotiating a N1,350-per-litre ceiling under a price-modulation arrangement aimed at shielding consumers from drastic fluctuations in global crude oil prices and exchange rates.

Under this plan, refiners and importers would initially bear costs surpassing the ceiling and recover the shortfall when market conditions improve. The Minister of Finance, Taiwo Oyedele, stated that the Federal Government would also engage in forward sales to domestic refineries, aiming to insulate pump prices from global volatility as production rises and previously committed crude becomes available.

However, CORAN spokesperson Eche Idoko expressed doubts about the proposed arrangement's supply commitments, pricing mechanism, and implementation. Idoko questioned the industry groups' endorsement of the proposal and the administration method, emphasizing the importance of inclusivity, commercial sustainability, and coordination by the National Petroleum Regulatory Commission (NUPRC) and the National Maritime Industry Regulatory Authority (NMDPRA).

Idoko also cautioned against reintroducing price regulation or subsidies through the backdoor, urging the government to prioritize increasing crude oil production, enhancing feedstock access, and reducing refining costs instead of setting refined petroleum product prices administratively.