At 51m litres daily supply, N953m incurred as subsidy

By Michael Eboh

Petrol

The Federal Government, through the Nigerian National Petroleum Corporation, NNPC, is currently paying N18.68 per litre as subsidy on Premium Motor Spirit, PMS, also known as petrol, according to data obtained yesterday, from the Petroleum Products Pricing Regulatory Agency, PPPRA.

The PPPRA, in its Petroleum Products Pricing Template for PMS as at November 15, 2019, disclosed that the expected open market price of PMS at the referenced date was N163.68 per litre, N18.68 higher than the N145 per litre ceiling fixed by the Federal Government for sale of the product at fuel retail stations.

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Giving a breakdown of the cost components of PMS imported by the NNPC, the PPPRA report stated that the cost of the commodity plus freight stood at $618.47 per metric tonne, an equivalent of N141.54 per litre, while lightering expenses and Nigerian Port Authority, NPA, charges stood at N2.75 and N0.84 per litre respectively.

Nigerian Maritime Administration and Safety Agency, NIMASA, charges, according the downstream regulatory agency,  stood at N0.22 per litre; Jetty Throughput Charge N0.60 per litre and storage charge N2.00 per litre.

The PPPRA report put the landing cost of the commodity at N147.95 per litre, while total distribution margins of N19.37 per litre brings the total cost of the commodity to N163.68 per litre.

 

Oil marketer’s import

For PMS imported by oil marketing companies, the PPPRA report explained that an additional N2.98 financing cost increases the landing cost of the commodity to N150.94 per litre, while the actual market price of the commodity imported by oil marketers rises to N167.50.

This means that the Federal Government would be paying a subsidy of N22.50 per litre of fuel imported by oil marketing companies.

To this end, using a daily fuel truck out figure of an average of 51 million litres as obtained from the PPPRA, the Federal Government is currently incurring N952.68 million daily as subsidy on PMS imported by the NNPC, and N1.15 billion incurred as subsidy daily on PMS imported by oil marketers.

 

N383bn spent in 7 months

Also, data obtained from the NNPC’s Monthly Financial and Operations Report for July 2019, showed that the NNPC spent N383.28 billion as under-recovery, also known as subsidy, on Premium Motor Spirit, PMS, in the first seven months of the year, January to July 2019, representing an average subsidy payment of N1.83 billion daily.

The amount incurred as subsidy from January to July 2019, according to the NNPC report, represented a decline of 9.75 per cent from an under recovery of N424.7 billion recorded from June to December 2018.

In addition, the report stated that the N383.28 billion spent on subsidy between January and July 2019, was 25.7 per cent or N78.28 billion higher than the N305 billion budgeted by the Federal Government for the whole of 2019.

According to the NNPC the amount incurred by the country on under recovery was N64.04 billion higher than the N319.24 billion transferred by the NNPC to the Federation Account in the seven-month period.

Giving a breakdown of the amount spent on subsidy, the NNPC report revealed that in January, February, March and April 2019, N40.53 billion, N2.876 billion, N13.34 billion and N104.35 billion was recorded as under-recovery respectively, while N102.34 billion, N30.64 billion and N89.2 billion was recorded in May, June and July 2019 respectively.

Under recovery is a situation whereby the NNPC incurs the cost of the differential between the official pump price of petrol and the actual cost of the commodity, especially as presently, the official price is lower than the actual market price.

The difference with this current system of subsidy payment is the fact that since the NNPC is currently the sole importer of PMS, also known as petrol, into the country, the corporation is making the payments to itself or deducting the amount as cost from its revenue, and not paying it to other oil marketers as was the case in past subsidy regimes.

Vanguard

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