Minister of State for Petroleum Resources Timipre Sylva says the federal government did not promise to implement a price cap on petrol.
The pump price of petrol was fixed at N125 per litre in March and was reviewed downwards in April to N123.50.
In May, only the ex-depot price was reviewed downwards to N108 and the retail price was adjusted to N121.50 in June.
However, the price rose to N143.80 in July following a recommendation of the Petroleum Product Pricing Regulatory Agency (PPPRA).
The increase in petrol price led widespread criticism of the petroleum ministry as most Nigerians had assumed that that a price cap had been fixed for the product.
However Mr Sylva issued a statement on Wednesday stating that the Buhari Administration believed in allowing market prices dictate the pump price of petrol.
Mr Sylva said the deregulation of petroleum products was done after examining the effects of petrol subsidy on the economy and the it was intended to provide an open market for private investors, under the guidance of the government.
“After a thorough examination of the economics of subsidising PMS for domestic consumption, the FG concluded that it was unrealistic to continue with the burden of subsidizing PMS to the tune of trillions of naira every year. More so when this subsidy was benefiting in large part the rich rather than the poor and ordinary Nigerians,” the statement read.
“Deregulation means that the government will no longer continue to be the main supplier of petroleum products. But will encourage the private sector to take over the role of supplier of petroleum products.
“This means also that market forces will henceforth determine the prices at the pump. In line with global best practices, the government will continue to play its traditional role of regulation; to ensure that this strategic commodity is not priced arbitrarily by private sector suppliers; a regulatory function not unlike the role played by the Central Bank of Nigeria in the banking sector; ensuring that commercial banks do not charge arbitrary interest rates.
“There was no time government promised to reduce pump price and keep it permanently low.”
“Petroleum products are refined from crude oil. Therefore the price of crude (the feedstock) for the refining process will affect the price of the refined product,” he explained.
“When crude oil prices were down, government, through its regulatory functions ensured that the benefits of lower crude oil prices were enjoyed by Nigerians by ensuring that PMS was lowered.
“At that time, we indicated that an increase in crude oil prices will also reflect at the pump.”
Sylva said there is a need to free up investment space in the midstream and downstream segment of the petroleum sector adding that Nigerians can “no longer avoid the inevitable and expect the impossible to continue”.