Petrol Subsidy Increases To N48.15 Per Litre

In the data obtained from the Petroleum Products Pricing Regulatory Agency, the landing cost of petrol has increased by N1.07 from N118.59 per litre on Monday. The daily subsidy on petrol, therefore, increased to an eight-month high of N48.15 per litre on Tuesday, compared to N3.64 on January 23 the agency’s pricing template showed. Nigeria, which banks on importation for most of its fuel needs due to  the poor state of the country’s refineries, has seen a drop in importation of refined petroleum products in recent months, leading to acute scarcity of the product across the country. On Wednesday major oil marketers said  that they were yet to resume importation of petrol due to financial constraints occasioned by the delay in the payment of subsidy arrears to them by the Federal Government.

According to the Executive Secretary, Major Oil Marketers Association of Nigeria, Mr. Obafemi Olawore, he said “We don’t have money to import. We have been relying on NNPC products. “At the moment, what we are loading is from the NNPC, and we sell at the government recommended price. I don’t know of other marketers.”

Subsidy refers to the money paid, usually by the government, to keep prices below what they will otherwise be in a free market system. The global benchmark Brent crude lost almost half of its value between June 2014 and January this year, plunging below $50 per barrel, but has rebounded in recent months. It traded around $64 per barrel on Wednesday. The landing cost of petrol was put at N75.15 per litre on January 23, almost a week after the Federal Government reduced the pump price of the product by N10 per litre.

An energy expert and Senior Lecturer, Energy Law at the University of Lagos, Dr. Adedayo Ayoade, told our correspondent that there were questions to be raised as regards the sudden increase in the landing cost of the product. “I am not aware of any spike in the price of crude oil that could have led to such an increase in the landing cost of petrol,” he added.

The landing cost is the sum of the product cost plus freight rate at N107.66; trader’s margin, N1.47; lightering expenses, N4.19; Nigerian Ports Authority fees, N0.77; financing cost, N1.68; jetty depot throughput charge, N0.8; and storage charge, N3. The addition of the distribution margins to the landing cost gives the Expected Open Market Price (total cost). The distribution margins, which comprise retailers, transporters and dealers’ profits, as well as bridging fund, marine transport average and admin charges were not stated.

Retailers get N4.6; transporters, N2.99; dealers, N1.75; bridging cost is N5.85; marine transport average, N0.15; and the admin charge, N0.15. The sub-total margin stands at N15.49. When added to the landing cost of N119.66, the EOMP of N135.15 per litre is arrived at. But this is subsidised and a flat official rate of N87 per litre is given.

The Federal Government had on January 18, 2015 announced the reduction in the pump price of petrol from N97 to N87 per litre, attributing this to the decline in global crude oil prices. The landing cost of the product was N116.79 per litre on May 21, while the subsidy component was N45.28 per litre, according to the PPPRA. There have been calls in many quarters on successive governments to fully deregulate the downstream sector of the oil and gas industry to encourage private investments in crude oil refining, as well as the privatisation of the nation’s existing refineries, which are working far below their installed capacities.

Source: Punch