ps.
--My People:If the report of the FG finally scrapping fuel subsidy and reducing (?) petrol price to N85/litre from Jan 1, 2016 is correct, then Minister of State for Petroleum, Dr. Emmanuel Ibe Kachikwu is moving in the right direction here, as he inspects more closely some of the arbitrariness in the Pricing Template that is used to determine the so-called "Fuel Subsidy" that we have been allegedly paying......May his tribe increase....Please come with me....In the PMS Pricing Template posted below by PPPRA for Christmas Day 2015, the expected Expected Open Market Price (OMP) for PMS based on thirteen cost items is N93.45 per liter. With the Retail Price fixed at N87 per liter, that requires a so-called subsidy of N6.45 nper liter. Let us put that at N6.5 per liter. To be more aggresive and fix the price at N85 means a subsidy removal of N8.5 per liter.Let us stay with N6.5 per liter subsidy removal for now, meaning an OMP of N87 per liter.That means that if on average EVERY cost element were reduced in price by N0.50 per liter, the OMP would come to N87 per liter. More realistically, if we leave three of the cost elements (#5, 14 and 15) in place, reduce two of them (#4, 6) by N0.25 per liter, two of them (#2, 12) by N0.5 per liter, four of them (#3, 7, 10, 11) by N0.75 per liter, one of them (#13) by N1.0, and one of them (#1) by N1.25 per liter and impose a Highway Maintenance Tax of N0.25 per liter (instead of building new toll gates, which require new capital costs without assurance of recovery), then we can still maintain the OPM at N87, and thereby completely eliminate so-called "subsidy". After all, some of those charges are somewhat arbitrary - some are even government-imposed (eg NPA cargo charges) - and are subject to negotiations.These are examples of the "price modulations" that Kachikwu must be talking aboutIn finally removing subsidy, the move must be properly explained to The People. The Wailing Wailers must NOT be allowed by subterfuge to turn The People against The Government under the political guise of protecting The People against Subsidy Removal - as we had in January 2012.And there you have it.Bolajij Aluko_______________________________________________________________Pricing Template – PMS
Posted on December 25, 2015 by pppra in Pricing Templates // 0 Comments
PPPRA PRODUCT PRICING TEMPLATE -PMS
Based on Average Platts' Prices for 24th December, 2015
Average Exchange Rate of the NGN =N= to US$ for 24th December, 2015
PMS
Cost Elements:
$/MT
Naira/Litre
1
C + F
458.41
67.34
2
Trader's Margin
10.00
1.47
3
Lightering Expenses (SVH)
27.72
4.07
4
NPA
5.25
0.77
5
Financing (SVH)
3.44
0.51
6
Jetty Depot Thru' Put Charge
5.45
0.80
7
Storage Charge
20.42
3.00
8
Landing Cost
530.69
77.96
9
Distribution Margins:
10
Retailers
31.31
4.60
11
Transporters
20.35
2.99
12
Dealers
11.91
1.75
13
Bridging Fund
39.82
5.85
14
Marine Transport Average (MTA)
1.02
0.15
15
Admin Charge
1.02
0.15
16
Subtotal Margins
105.44
15.49
17
Highway Maintenance
0.00
0.00
18
Government Tax
–
0.00
0.00
19
Import Tax
–
0.00
0.00
20
Fuel Tax
–
0.00
0.00
21
Subtotal Taxes
0.00
0.00
22
Total Cost
636.13
93.45
23
** Ex-Depot (for collection)
528.64
77.66
24
** Under/Over Recovery
43.91
6.45
25
Retail Price
592.22
87.00
Expected Open Market Price (OMP) (Naira/litre) is Landing cost +Margins
93.45
* C+F price is Offshore Nigeria
Conversion Rate (MT to Litres):
1341
Exchange Rate (N to $):
197.00
* Official Ex Depot is exclusive of Bridging Fund, Marine Transport Average (MTA) & Admin. Charge
* *Ex Depot includes Bridging Fund, Marine Transport Average (MTA) & Admin. Charge
Data is as at 24/12/15
______________________________________________________________DESCRIPTION OF COMPONENTS ON THE PRICING TEMPLATE With Effect from February 2009
1. PRODUCT COST ($/MT)
This is the monthly moving average cost of products cost as quoted on Platts Oil gram. The reference spot market is North West Europe (NWE).2. FREIGHT ($/MT)
This is the average clean tanker freight rate (World Scale (WS) 100) as quoted on Platts. It is the Cost of transporting 30, 000mt (30kt) of product from NWE to West Africa (WAF). Trader's margin of $10/MT is also factored into the Freight cost.3. LIGHTERING EXPENSES ($/MT)
STS/Local Freight charge is the cost incurred on the transshipment of imported petroleum products from the mother vessel into daughter vessel to allow for the onward movement of the vessel into the Jetty. This charge includes receipt losses of 0.3% in the process of products movement from the high sea to the Jetty and then to the depot. The mother vessels expenses are based on the allowable 10 days demurrage exposure at the rate of $28,000 per day.The Lightering Expenses also includes the Shuttle vessel's chartering rates from Offshore Lagos to Lagos and Port Harcourt which currently stands at N2.00 per litre and N2.50 per litre respectively. Transshipment (STS) process is as a result of peculiar draught situation and inadequate berthing facilities at the Ports.
4. NIGERIA PORT AUTHORITY (NPA) CHARGE ($/MT
It is the cargo dues (harbor handling charge) charged by the NPA for use of Port facilities. The charge includes VAT and Agency expenses.Currently, NPA charge attracts $10.50/MT on the pricing template.
5. FINANCING
It refers to stock finance (cost of fund) for the imported product. It includes the cargo financing based on the International London Inter bank Offered Rates (LIBOR) rates+5% premium for 30 days (for Annual Libor rate of 2.07%, LIBOR cost would be 7.07%). Also included in the Finance cost is the inertest charge on the subsidy element being awaited for an allowable 60 days period at Nigerian Inter Bank Offered Rate (NIBOR) rate of 22%.6. JETTY DEPOT THRU PUT
This is the tariff paid for use of facilities at the Jetty by the marketers to move products to the storage depots. The value is currently N0.80/litre.7. STORAGE CHARGE
Storage Margin is for depot operations covering storage charges and other services rendered by the depot owners. The charge is currently N3.00/litre.8. LANDING COST
It is the cost of imported products delivered into the Jetty depots. It is made up of components highlighted above (1, 2, 3, 4, 5, 6 and 7).9. DISTRIBUTION MARGINS
These include Retailers (N4.60 per litre), Transporters margins (N2.99 per litre), Dealers margin (N1.75 per litre), Bridging Fund (plus Marine Transport Average) (N6.00 per litre) and Administrative charge (N0.15 per litre). This amounts to N15.49 per liter on the template. The overhead cost and other running costs have been considered in the determination of these margins.10. TAXES
These include highway maintenance, government, import and fuel taxes. It has the overall objectives of revenue generation, social infrastructure investment and servicing and efficient fuel usage. Presently, all these attract zero taxes.11. RETAIL PRICE
This is the expected pump price of petroleum product at retail outlet. It is made up of landing cost of imported product plus reasonable distribution margins._______________________________________________________________________
FG to scrap fuel subsidy, reduce petrol price to N85/litre from Jan 1
The Federal Government would on January 1 next year reduce the pump price of the Premium Motor Spirit (PMS) to N85 per litre, reports PR Nigeria.
The Minister of State for Petroleum, Dr. Emmanuel Ibe Kachikwu [image above] broke the news to journalists in the Port Harcourt Refinery Company (PHRC), where he spent Christmas inspecting the plant.
Asked when the Federal Government would release the new price template of the Petroleum Product Pricing Regulation Agency (PPPRA), he said that he approved the new price for the agency on Thursday.
Pressed to reveal when the new price will become effective, Kachikwu, who is also the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) said "like I said, we have done a modulation calculation and it is showing us below N87. I imagine that if PPPRA publishes it today, it will become effective immediately. But the 1st of January that is when we are looking at."
According to him, the new price is below the current N87 per litre and it would now convince Nigerians that the pricing modulation that the Federal Government promised to embark on a few days ago was not a trick.
He noted that following government's analysis and research, it has been realized that the country can fluctuate the fuel market in accordance with the crude oil market fundamentals.
Justifying government's reasons for scrapping the Petroleum Support Fund otherwise known as oil subsidy, Kachikwu explained that government can no longer afford to subsidize the product following the fraud that has attended its operation.
He added that it has become clear that government earnings are dipping on daily basis.
His words: "It is out; I signed off on it yesterday (Thursday). I imagined that in the next couple of days the marketers would get advice on that. The nice thing about the PPPRA, where I signed up on it yesterday is that the price will be far below N87.
So for the first time people will understand that the pricing modulation I was talking about is not a gimmick. It is for real. We have gone to find out how we will be able fluctuate this market to reflect what the reality of crude market is. The objective is that one, we cannot afford to continue to subsidize.
We can't even understand where those subsidies were going to. There are a lot of fraud elements in it so we need to cut that of.
The second is the earning capacity of the Federal Government is deteriorating by the day with lower prices of crude and come out more."
He submitted that from the application market realities for the pricing modulation, government has discovered that petrol would sell for either N85 or N86 per litre.
The minister recalled that it was from this axiom that President Muhammadu Buhari announced that the price of petrol remains N87 at the moment.
Kachikwu said: "But in applying that where we landed when we did the analysis for the very first time was about N85 or N86 so it is below N87.
And maybe the first price that will come will reflect it. That was why Mr. President said that prices will be N87 for now. And that is what we have in mind."
On the security of the pipelines, he said that government had tried stopping the menace with military intervention to no avail before it engaged some private contractors who had worked with the majors for the crude pipeline management.
According to him, the private contractors have taken over Atlas Cove, Mosimi and they would be extending the surveillance to Ilorin between yesterday and today.
They will also look at the Port Harcourt and Aba axis, he stressed.
The minister said that government is now beginning to have a clue of how to tackle pipeline insecurity, adding that it is far more expensive to convey petroleum and products through pipelines than trucking them by road.
He said from the briefing he got from the inspection of the refineries, they are close to re-opening.
"In the next one week, we are ready to see products out of here", he disclosed.
Kachikwu said that a lot of the rehabilitation of the refinery was being done with intensive manual labour of the staff since paucity of fund affected the holistic change that is required in the factory.
He said that the refinery is now aging so one fault comes up after the other even after repair but that would stop when government repairs the plant holistically early next year.
According to him, about 5.5 million litres daily of PMS is expected from the refinery in the next few days. Other products to come from the plants, said Kachikwu "are AGO, Kero and others. Where we love to be is to have half of the consumption of this country at the refineries at the minimum, which is about 20million litres. But where we are with the sleepless night I have had in the last few weeks any molecule is significant.
Kaduna will still be doing 2.3million. Let's start from there. And that is doing 60 per cent performance. This is still an assumption. I will like to see them getting closer to 80 or 90. By the time they time they do that we will be getting 11 to 12million litres out of this place."
_______________________________________________________________________
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