By Michael EBOH
THE Nigerian National Petroleum Corporation, NNPC, has spent N112.079 billion on fuel subsidy in the first 10 months of 2017, between January and October 2017, financial documents obtained from the corporation have revealed.
Contrary to claims by oil marketers that subsidy re-emerged in October, making it unprofitable for them to continue fuel import, the documents from the NNPC revealed that fuel subsidy officially returned in January 2017, a period when the NNPC started making provision for it in its financials.
Confirming this, the NNPC Monthly Financial and Operations Report for October 2017, released this week, declared that in January 2017, the NNPC made a provision of N37.264 billion for under-recovery, another term for subsidy payment.
Under-recovery, in downstream petroleum marketing parlance, is when the expected open market price of PMS is below the approved official retail price at the pump. The expected open price is a combination of the cost of importation and distribution of the commodity, such as marketers’ margins, landing cost and freight cost.
The difference with this current system of subsidy payment is the fact that the NNPC is making the payments to itself and not to other oil marketers as was the case in past subsidy regimes, since it had been the major importer and supplier of Premium Motor Spirit, PMS, also known as petrol over the last couple of months.
The NNPC report revealed that provision for fuel subsidy in January was the highest in the 10-month period, while in February, March, April and May 2017, the NNPC deducted N6.3 billion, N8.206 billion, N8.206 billion and N7.74 billion respectively, for subsidy payments.
In addition, the report pointed that the NNPC recorded ‘under recovery’ of N11.8 billion, N10.25 billion, N7.94 billion, N7.52 billion and N6.85 billion for June, July, August, September and October 2017 respectively.
The money utilized for funding the subsidy payments, according to the report, was from the proceeds of the NNPC sale of its domestic crude oil allocation, thereby cutting down the amount of money remitted to the Federation Account.
Last week, Vice President Yemi Osinbajo had clarified that the NNPC and not the Federal Government pays for the fuel subsidy that has emerged with the N171 landing cost as against the official retail price of N145.
He had stated that said since the NNPC buys the fuel, it bears the cost, noting that one of the most important objectives of the Buhari administration is to ensure that the average Nigerian citizen is not again put through the pain of an increase in fuel price.
He said, “NNPC is trading in fuel; the Federal Government is not, at the moment, paying for any subsidy. NNPC is trading. If you are buying and selling fuel, you would have to be able to pay for it.
“It is not a question of government provision for subsidy, the Federal Government, at the moment, is not paying any subsidy. And don’t forget that the way that the NNPC trades is that, in many cases, NNPC is actually giving fuel; there is 445, 000 barrels of fuel. So really what you are seeing, in many cases, is more or less an exchange for PMS. So at the moment NNPC is paying the cost.”
Also, few days later, Group Managing Director of the NNPC, Mr. Maikanti Baru, confirmed that the Landing Cost of PMS, which consists of Cost, Insurance and Freight, CIF, was then N171 per litre.
Briefing journalists in Abuja, Baru said the Cost, Insurance and Freight price of PMS was $620 per metric tonne, adding that at N305 to a dollar, the landing cost translates to N171 per litre.
However, he had disclosed that despite the higher landing cost, there is no plan to increase the price of the commodity, adding that even with the current rate, the marketers are being supplied the product at N133.28, giving them ample opportunity to make profit.
In addition, Baru had, explained that the NNPC would like to see a thriving and vibrant private sector that would participate actively in product importation going forward.