Refiners back forward crude sales, oppose petrol price cap

The Crude Oil Refiners Association of Nigeria has backed the Federal Government’s plan to sell crude oil to domestic refineries through forward contracts but warned against imposing a petrol price ceiling without explaining how costs above the limit would be recovered.

The association said forward sales could help refiners secure feedstock and reduce exposure to volatile international oil prices but insisted that the proposed arrangement must be transparent, commercially sustainable and accessible to all local refiners.

The position comes as petrol prices in Abuja have climbed to about N1,410 per litre, exceeding the government’s proposed N1,350-per-litre ceiling on the ex-gantry or landing cost of the product.

Last week, the government confirmed that it was negotiating a N1,350-per-litre ceiling under a price-modulation arrangement designed to cushion consumers against sharp fluctuations in global crude oil prices and exchange rates.

Under the proposal, refiners and importers would initially absorb costs above the ceiling and recover the shortfall when market conditions improve.

The Minister of Finance and the coordinating minister of the economy, Taiwo Oyedele, said at a press briefing that the Federal Government would also sell crude forward to domestic refineries.

According to him, the measure was expected to shield pump prices from global volatility as production increased and previously committed crude was freed up.

“Forward sales of crude to domestic refineries. As production rises and previously committed crude is freed up, this would shield pump prices from volatility in the global market,” he said.

Speaking with our correspondent on Sunday, CORAN spokesperson, Eche Idoko, said forward sales were workable in principle but questioned the proposed arrangement’s supply commitments, pricing mechanism and implementation.

“The proposed forward sale of crude to domestic refineries is workable in principle and could provide feedstock certainty and reduce price volatility. However, the critical questions are availability, pricing, transparency and the protection of existing contractual obligations,” Idoko said.

He asked whether the major industry groups had endorsed the proposal and how the government intended to administer it. “Have OPTS and IPPG bought into this arrangement? Who will administer it, and under what commercial terms?” he queried.

Idoko said the government must ensure that the arrangement did not favour only large refineries at the expense of smaller operators.

“I have consistently advocated affordable crude access for all domestic refineries, including modular refineries, not just the big operators. Any framework must be inclusive, commercially sustainable and properly coordinated by NUPRC and NMDPRA,” he said.

However, the CORAN spokesperson expressed reservations about the proposed N1,350-per-litre ceiling, warning that the policy could amount to a return to price regulation if the government failed to explain how losses would be handled.

“On the proposed N1,350 ex-gantry price ceiling, I have serious reservations. How was that figure determined? Who bears the difference when production costs exceed the ceiling, and how will the shortfall be recovered?” he asked.

He added, “While price stability is desirable, we must be careful not to reintroduce price regulation or subsidy through the back door.”

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Idoko argued that the government should prioritise increasing crude oil production, improving feedstock access and reducing refining costs rather than determining the prices of refined petroleum products administratively.

His concerns come amid renewed debate over Nigeria’s ability to supply local refineries with sufficient crude oil, following comments by the finance minister.

Oyedele recently said Nigeria’s production of about 1.8 million barrels of crude oil daily did not translate into an equivalent volume available to the Federal Government for domestic allocation.

He explained that production-sharing contracts, joint-venture arrangements, production costs, and royalties reduced the volume available to the government.

“The reality is that today we do not have up to 700,000 free crude to give anyone, including Dangote,” Oyedele said during an interview on Channels Television’s Politics Today.

The minister’s comments highlight a key challenge for the proposed forward-sale arrangement: the government must secure sufficient available crude volumes while meeting existing contractual obligations and the needs of domestic refiners.

Meanwhile, the Chief Executive Officer of Petroleumprice.ng, Jeremiah Olatide, welcomed the proposed forward sales, saying the arrangement showed that the government was responding to industry concerns about rising crude prices and their impact on domestic fuel costs.

“I am happy that the Federal Government has decided to listen to experts’ advice that there must be a form of intervention through crude supply to the refineries. These forward sales to local refineries are a good move,” Olatide said.

He added that the arrangement could ease pressure on refiners and improve their bargaining power when negotiating feedstock prices.

“It is definitely going to help and ease the pressure on refineries and, with that, I think better negotiation, better price. It is good and shows the government is listening to what stakeholders are doing and taking the right steps, controlling the effect of crude oil prices to the Nigerian downstream market,” he said.

The government’s proposed price ceiling is part of broader efforts to cushion consumers against rising fuel costs amid international market disruptions.

However, the gap between the proposed N1,350 ex-gantry ceiling and petrol prices of about N1,410 per litre in Abuja underscores the distinction between wholesale costs and pump prices, which also reflect distribution expenses and retail margins.

MRS and other filling stations across Abuja and its environs have increased their retail prices of Premium Motor Spirit, popularly known as petrol, amid rising fuel costs.

A market survey by our correspondent on Sunday showed that MRS outlets raised their pump price by N39 per litre to N1,409 from N1,370 over the weekend.

The new price has been implemented at MRS stations in Kubwa, Katampe, Gwarinpa and other parts of the Federal Capital Territory.

Similarly, Ranoil and AA Rano increased their petrol prices by N10 per litre to N1,410 from N1,400. Nipco also sold petrol at N1,410 per litre, while MRS retailed the product at N1,409 per litre.