The document summarizes evaluations of recent price adjustments in Nigeria's downstream oil sector. It finds that the most likely open market price for premium motor spirit (PMS) is 88 Naira per liter based on historical pricing trends. However, it notes delays in price adjustments as crude oil prices fell, resulting in higher subsidies. It also argues that the lack of a pricing template for liquefied petroleum gas (LPG) has led to non-transparent, unjustified overcharging for consumers compared to other countries. The document calls for PPPRA to establish LPG pricing guidelines to make prices more affordable and competitive.

1. Nigeria Downstream Sector Brief
Jan 16th 2015 PMS Price Adjustment Evaluation
PPPRA Price Adjustment Strategy Evaluation (Nov 2014-Jan 2015)
The Need to Introduce an LPG Pricing Template by PPPRA
Volume 1-3| Jan 2015
Usman Suleman MBA (Oil & Gas ); B.Eng (Civil)
Proverbs 4:7_Wisdomis the Principal Thing

2. Nigeria Downstream Brief | Vol_1 Jan 30th 2015
Jan 16th 2015 PMS Price Adjustment Evaluation
In order to evaluate the current downward review in the regulated pump price of PMS to N87 per
litre from N97 per litre vis-à-vis determine the most likely Open Market Price(OMP), the PPPRA
Pricing Template for some selected periods as indicated in the Chart below were analyzed.
The result of the analysis indicates that the most likely OMP for PMS is N88 per litre which was
determined by escalating the Feb ‘09 price level with reference to the 2-month average crude oil
price prior to price adjustments and applying YOY price inflation increase of 1.25% over circa. 6-years,
while also considering the Distribution Margin differences between Feb ‘09 and Jan ‘15 using the 6th-
tenth rule.
Government PMS Price Adjustment decision is given a Fair Value from our traffic light rating.
88.0
N/litre
Decision
Rating
65
PMS Price Regime Scale: Naira/litre
70 75 80 85 90 95 100 105 110 115
 Fair
Estimated Price level based on using a
2-month crude oil average price, prior
to price adjustment (This was
determined using the 6-tenth rule from
Feb ‘09 OMP level and an inflationary
increase of 1.25% over a circa. 6-years
period.
PPPRA Price
Adjustment
Period
2-months Crude
Price Average Prior
to Price
adjustment($/bbl)
Landing Cost
(Naira per
liter)
Distribution
Margin (Naira
per liter)
Expected
Open Market
Price (Naira
per liter)
Regulated
Price (Naira
per liter)
Subsidy
(Naira per
liter)
Exchange
Rate
(Naira:$USD)
Period 1_Feb '09 44.05 58.51 13.20 71.71 65.00 6.71 141.78
Period 2_Dec '10 88.74 112.82 13.20 124.75 65.00 59.75 152.03
Period 3_Apr '11 118.80 145.56 13.20 158.76 65.00 93.76 155.42
Period 4_Dec '14 67.51 83.80 15.49 99.29 97.00 2.29 158.85
Period 5_16th Jan
'15
52.37 74.35 15.49 89.84 87.00 2.84 158.85
89.84
N/litre
87.00
N/litre
Newly Announced
Regulated Price for PMS
EOM Price for the same
period for PMS
Source: PPPRA Templates (2009-2015)
Opec Crude Oil Open Basket Regime
Authors Analysis

3. Nigeria Downstream Brief | Vol_2 Jan 30th 2015
PPPRA Price Adjustment Strategy Evaluation (Nov 2014-Jan 2015)
In order to understand and evaluate PPPRA’s Price Adjustment Strategy for the period(s) spanning
November 2014 to January 16th 2015; the price adjustments made were mirrored against the daily Opec
Basket prices for the same period.
From the analysis, it appears that PPPRA price adjustments were made constant for a period of 44days in the
face of dropping crude oil prices over the same period. This delay in price adjustment could have only
increased the OMP and the subsidy borne by Nigerians and Government. This delay in price adjustment also
occurred between 29th December and 16th January 2015.
While the decision to reduce the regulated price for PMS to N87 per liter is commendable, it was rather
belated as the opportunity to create a positive perception by consistently reducing the OMP against falling
oil prices was missed by Government .
PPPRA Price Adjustment decision for these periods are given a Barely Fair Value from our traffic light rating.
Decision
Rating
 Barely Fair
Source: PPPRA Templates (2009-2015)
Opec Crude Oil Open Basket Regime
Authors Analysis
0
20
40
60
80
100
120
140
21-Oct
24-Oct
27-Oct
30-Oct
2-Nov
5-Nov
8-Nov
11-Nov
14-Nov
17-Nov
20-Nov
23-Nov
26-Nov
29-Nov
2-Dec
5-Dec
8-Dec
11-Dec
14-Dec
17-Dec
20-Dec
23-Dec
26-Dec
29-Dec
1-Jan
4-Jan
7-Jan
10-Jan
13-Jan
16-Jan
19-Jan
22-Jan
25-Jan
28-Jan
31-Jan
November-14 December-14 January-15
PPPRA Refined Product Price -Adjustment Strategy Evaluation
(Nov 2014-Jan 2015)
PMS ($/bbl) DPK ($/bbl) AGO ($/bbl) FO ($/bbl) Opec Crude Oil Basket Price $/bbl

4. Nigeria Downstream Brief | Vol_3 Feb 4th 2015
The Need to Introduce an LPG Pricing Template by PPPRA
The non-availability of an official LPG Pricing Template have allowed for a non-transparent price fixing regime. From
our analysis, using Saudi-Aramco Contract Price for a 70:30 LPG Mix and marking-up the current Cost Elements for PMS
by 70% to determine the most likely LPG Open Market Price in Nigeria; indicates that Nigerians are currently being
surcharged by the current system.
To further confirm these anomaly, our projected OMP for LPG was compared to the recently revised OMP for New Delhi
India, for the same period. From the comparative analysis, using Ajah_Lagos average price of N3000 per 12.5kg shows
that Nigerians may likely be paying in excess of N1600 per 12.5okg than Consumers in New Delhi.
However from our analysis the projected maximum OMP for February 2015 should be about 1856 Naira per 12.5kg
Cylinder i.e. about 456 Naira above Delhi OMP (Desired Price plus Distributor Commission for Feb, 2015). This is because
the cumulative margin above C+F Price was projected to be 202 $ per mt as compared to Delhi ‘s 160 $ per mt.
It is therefore imperative, for PPPRA to come up with a Price Adjustment Strategy for LPG to correct this unjustified
Anomaly. It should be noted that Nigeria is a Net Exporter of LPG as against India that is a Net Importer , with bulk of its
Imports coming from the Asian Gulf.
In developing the new pricing template, provisions should be made to support an LPG Infrastructure expansion fund as
a percentage of the Cost & Freight Price from Bonny NLNG; while the Tax(s) Component should be made Zero. A 1-
month moving average price fixing regime based on a 5-10% discount on the Saudi-Aramco Contract Price for Propane
and Butane Should be adopted by the NLNG for the Domestics Market.
This initiatives will make LPG Prices very affordable and thus competitive against the currently subsidized OMP for
Kerosene; and ultimately drive the demand for LPG in Nigeria.
Decision
Rating
Source: Delhi LPG Price Buildup for Feb 2015 (Assessed from www.hindustanpetroleum.com/documents/pdf/pb/pricebuildup_LPG.pdf)
PPPRA PMS Jan 2015 Template (Assessed from www.pppra.ng.com)
Opec Crude Oil Open Basket Regime
Authors Analysis
2,443.30 2,441.31 2,361.89 2,320.19 2,286.43
1,982.63 2,055.23
1,824.97 1,856.03
0.00
50.00
100.00
150.00
0.00
1,000.00
2,000.00
3,000.00
4,000.00
Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15
Nigeria Projected LPG Open Market Price(OMP) Analysis
Using Saudi-Aramco CP
Distributors Margin ($/mt)
Storage Charge ($/mt)
Jetty Thru'put ($/mt)
Financing ($/mt)
NPA ($/mt)
Lightering Expenses ($/mt)
Traders Margin ($/mt)
LPG Freight ($/mt)
LPG FOB Cost using Saudi Aramco LPG Contract Price for 70:30 Butane:Propane Mix ($/mt)
Projected Expected Open Market Price Naira/12.5kg)
Opec Crude Oil Open Basket Price ($/bbl)