A dispute between the Nigerian government's fuel regulatory body and private fuel marketers on the pricing template for importing gasoline is hampering the country's gasoline import program for the second quarter, officials said Tuesday.
This dispute is taking place as Africa's largest oil producer battles weeks of crippling gasoline shortages.
The government pays a subsidy on imported gasoline of the difference between the so-called landing cost and the officially regulated domestic pump price, currently Naira 86.50/liter (about $1.64/gal).
The Petroleum Products Pricing Regulatory Agency issued a new template in the first quarter of this year -- which resulted in a lower landing cost and no subsidy compensation needing to be paid to marketers.
The PPPRA has said that this template will continue in Q2 and private fuel companies are protesting over the template because they say it has resulted in a "wrong" calculation of the landing cost of the fuel and an underestimation of the costs of landed gasoline.
OVER-RECOVERY
The PPPRA said Tuesday it is expecting that for imported gasoline in the first quarter marketers will refund the government with the extra money gained on the N86.50/l official retail price, where there had been landing costs lower than the official selling price, a situation known as "over-recovery."
"The agency also wishes to assure Nigerians that the funds from over-recovery in the first quarter shall be duly utilized for whatever noticeable imbalance in April 2016 in line with the Price Modulation Principle," the PPPRA said.
"There is still a dispute on this request by the PPPRA," a spokesman for Nigeria's main fuel marketers MOMAN said. "Without this being resolved, it may delay the companies participating in this quarter's program."
The PPPRA pricing template references Platts European gasoline assessments -- namely the 10 ppm premium unleaded gasoline barges -- whose prices are typically subject to seasonality as during the winter October-March), the cheaper high Reid Vapor Pressure gasoline blend is assessed while in the summer it is the more expensive low-RVP summer grade.
Historically, the blend value differentials between summer and winter grade European gasoline have hovered around $30-$35/mt.
While West African grade gasoline is typically higher in sulfur content and lower in octane rating than European gasoline, its RVP mandate is constant throughout the year at around 60 kPa, which is the same RVP level at which European gasoline is assessed throughout the summer.
WAF-grade gasoline is typically traded against the 10 ppm premium unleaded gasoline barges and the PPPRA pricing template resulted in an "over-recovery" during Q1 for most marketers when the landed cost of gasoline was calculated as lower than Naira 86.50/l.
LACK OF FOREX
The gasoline market has been further thrown into confusion following the continued scarcity of foreign exchange, marketers said.
Although the government has assured the industry it will be able to obtain more foreign exchange through crude oil marketing, it is unclear how this will be accomplished.
The Q2 import permits allocated 58% of the 3.5 million mt overall volume of gasoline to private companies, which continue to struggle to access foreign exchange and letters of credit.
"The logjam now is that there are conflicting signals from the government [regarding] the implementation of the foreign exchange assistance by the oil majors," an official with one of the fuel marketing companies said.
Despite producing just over 2 million b/d of crude, Nigeria imports more than 90% its fuel requirements, with its four state-owned refineries running at very low utilization rates.
