Petroleum Regulatory Agency Justifies Increase in Fuel Prices

By Amin Kef Sesay

In a Public Announcement dated 3^rd February 2021 signed by the Chief Executive Officer of NP (SL) Ltd, Kobi Walker, the Executive Chairman of the Petroleum Regulatory Agency (PRA), Brima Baluwa Koroma, the Managing Director of TOTAL Sierra Leone, the Senior Permanent Secretary of the Ministry of Trade and Industry, the Financial Secretary, Sahr Jusu, the Managing Director of Leonoil it was categorically stated that following recent developments in the international market of petroleum products, the Petroleum Regulatory Agency, Ministry of Finance, Ministry of Trade & Industry and the Oil Marketing Companies (OMCs), have jointly reviewed the pump prices of petroleum products as at 29th January 2021.

It continued that the Petroleum Regulatory Agency hereby announces the following pump prices for the month of February 2021:

Petrol: from Le 7,000 per litre to Le 8,500 per litre, Diesel from

Le 7,000 per litre to Le 8,500 per litre, Kerosene from Le 7,000 per litre to Le 8,500 per litre and Fuel Oil from Le 7,000 per litre to Le 8,500 per litre.

The Public Announced furthered that Government and its valued Oil Operators continue to reform the downstream petroleum sector in a transparent way including regular monthly review of pump prices based on the movements in the Platts and exchange rates.

It was categorically pointed out that all OMCs and Fuel Dealers are urged to adhere to the above pump price adjustment ach

In another development, the Petroleum Regulatory Agency (PRA) has on the 4^th February 2021 released what it refers to as the February 2021 Pricing Review Basic Industry Facts.

According to the PRA, the petroleum sector remains very critical contributing about 15% to domestic revenue adding that it has recorded consistent revenue growth since 2018.

It further revealed that Sierra Leone consumes about 1.1 million liters of petroleum products per day and at the moment there are only two petroleum importers in the country, two large storage companies
and one petroleum Jetty.

“Operational storage is currently less than 200,000 metric tons, this is 40% of the national target and Government is addressing this,” it was also divulged.
The PRA stated that the Oil Marketing Companies do not benefit from economies of scale because of  the small size of petroleum imports maintaining that the current average replenishment period for fuel in Sierra Leone is two weeks and such  has a tendency for frequent replenishment that poses risk of stock-out, hoarding and
speculative buying.

In terms of fuel pricing for February 2021 the PRA said Sierra Leone like most African countries uses a pre-defined petroleum price structure.

According to the institution, the pump price in Sierra Leone is efficiently determined by a +/-5% trigger mechanism of the landed cost which is mostly driven by the combined effect of the
international Oil reference price (Platts) and foreign exchange.

It stated that the Sierra Leone pricing regime is well structured, transparent and is reviewed monthly.
Based on what the PRA revealed, Pump prices have been changed six (6) times since 2018, and it has been reduced three (3) times during that period.

It said though there were situations when the landed cost of all petroleum products were in excess of 10% month-on-month and such was largely impacted by an uncontrolled rebound in Oil Prices in the Global Markets warranting sharp increase in pump price, however, Government kept the pump prices unchanged at Le 7,000 per liter which was below market price of Le 9,000.

The PRA furthered that Global Oil prices are exogenous and were affected by sharp volatility between May and December 2020, but Government did not allow the high costs to be passed on to the poor consumers and hence it suspended the automatic pricing
adjustment mechanism since May 2020 to date.

It added that the Government has intervened by injecting about Le 66 bn during that period and Le 17.43bn in January 2021 to support the pump price stabilization.

Notwithstanding, according to the PRA, the increases in the international Oil prices on the February 2021pump price such a prevailing pump price still remains the cheapest within the Region

Dilating on the issue of smuggling, the PRA stated that a significant portion of benefits from fuel subsidies are not received by
the intended beneficiaries in Sierra Leone, but instead are captured by smugglers and black-marketers, stating that it is profitable to buy subsidized fuel domestically on the black market and then smuggle it and sell at market rates in neighboring countries.

According to the petroleum regulatory entity such has led to a depletion of stock balances making the country vulnerable to
shortages and panic buying

On the issue of frequent stock replenishment the PRA reveals that because of lower fuel prices in the country, relatively below regional average, it is clear that the Government is currently subsidizing neighboring countries because of the reported huge volume carried out of the country hence putting pressure on the available stock.
Giving a run-down  on a comparative basis of former  regional fuel price converted in Le/Litre-as at 27th January, 2021 taking into consideration Sierra Leone, Guinea, Liberia, Ivory Coast, Ghana and The Gambia, the PRA disclosed the following: Petrol– Sierra Leone Le 7,000.00, Guinea Le 9,180.00,  Liberia Le 7,936.08, Ivory Coast Le 11,376.00 , Ghana Le 9,156.98, The Gambia Le 9,133.55.

For Diesel the comparison are as follows:
Sierra Leone Le 7,000.00, Guinea Le 9,180.00, Liberia Le 9, 258.70,
Ivory Coast Le 11, 376.00, Ghana Le 9, 204.92, The Gambia Le9,053.56.

In terms of Kerosene the comparison is as such
Sierra Leone Le 7, 000.00, Guinea Le 13, 374.90, Liberia Le10, 522.80, Ivory Coast Le7, 711.60, Ghana Le7, 486.52, The Gambia Le 7,486.52.

The PRA also stated that Exchange Rate source is the Bank of Sierra Leone as at January, 27th 2021.