Fuel Subsidy Hits N1.7bn/pd, as Oil Price Hovers at $63.1 Per Barrel

There are indications that despite the implementation of the no subsidy policy by the Federal Government, subsidy obligations of the government may have started mounting with last week’s closing daily figure at about N1.7 billion, or N12 billion during the week.

This follows the huge leap in the international oil price, the benchmark for local petrol price determination. The crude prices closed last week at about $63.14 per barrel in the global market.

On February 5, 2021, when the oil price was nearing $60 per barrel, the expected open market price of petrol rose from N160 to N190 per litre, based on the petrol pricing template of the Petroleum Products Pricing Regulatory Agency, PPPRA.

Since then, the PPPRA, which listed some items, including Administrative charges and Retailers margin at N1.23, and N6.19 respectively, has not released a comprehensive template, capable of guiding stakeholders in the sector.

But a visit to the private depots in Lagos, and its environs, weekend, showed that the landing cost of the product stood at N180 per litre, meaning that the pump price would certainly be in excess of N192 per litre.

However, the product is currently being sold at N162 at many filling stations in Lagos, Abuja, and other cities, although some Independent marketers in the outskirts sold at higher prices across the country.

Based on an expected open market price of N192 per litre of petrol and an average current pump price of N162 per litre, the nation’s petrol subsidy hovers at about N30 per litre.

Nevertheless, with a daily petrol consumption of about 57 million litres, and a subsidy of N30 per litre, the subsidy currently hovers at N1.7 billion daily, and N12 billion weekly.

No price increase — NNPC

However, the Nigerian National Petroleum Corporation, NNPC, apparently the nation’s sole importer, said in spite of the rise in the price of crude, it would not increase the ex-depot price of petrol in February 2021.

In a statement signed by the Group General Manager, Group Public Affairs Division, Dr. Kennie Obateru, the Corporation, stated that the decision was to allow ongoing engagements with organized labour and other stakeholders on an acceptable framework that will not expose the ordinary Nigerian to any hardship, to be concluded.

NNPC urged petroleum products, marketers, not to engage in the hoarding of the product in order not to create artificial scarcity and unnecessary hardship for Nigerians while giving assurance that it has enough stock of petrol to keep the nation well supplied for about 40 days.

Regular monitoring

It further called on relevant regulatory authorities, especially the Department of Petroleum Resources, DPR, to step up monitoring of the activities of marketers with a view to sanctioning those involved in product hoarding or arbitrary increase of pump price.

It would be recalled that the nation’s downstream sector was deregulated in March 2020 with the Minister of State for Petroleum Resources, Chief Timipre Sylva, stating that the prices of petroleum products would be determined by prevailing market forces.

Painful times — Minister of State

Specifically, the Minister of State for Petroleum Resources, Chief Timipre Sylva, had said: “So we want to take the pleasure and we should as a country be ready to take the pain. Today, the NNPC is taking a big hit from this. We all know that there is no provision in the budget for subsidy. So, somewhere down the line, I believe that the NNPC cannot continue to take this blow.

There is no way because there is no provision for it. As a country, let us take the benefits of the higher crude oil prices and I hope we will also be ready to take a little pain on the side of higher product prices.”

MOMAN harps on full deregulation

Nevertheless, speaking virtually on, ‘After Deregulation, What Next?’ in Lagos, February 11, 2021, Mr. Adetunji Oyebanji, Chairman, Major Oil Marketers Association of Nigeria, MOMAN, had said: “With a fully deregulated downstream industry, the natural fear and anticipation of Nigerians is the increase in the price of transportation, food items, and the attendant economic hardships. Solutions to these challenges can only emanate from a collective resolve by all stakeholders to face up these challenges together. We must as a national debate and share pragmatic and realistic initiatives to mitigate the impact of a pump price increase that could follow a fully deregulated downstream.

“We stand with Nigeria and Nigerians through this difficult time and support the Federal Government’s promise to pass the Petroleum Industry Bill, PIB this year and fully deregulate the petroleum downstream sector. The benefit of a liberalized downstream is the most visible means of growing the economy in the medium to long term.

“Nigeria can become the refining hub of West and Central Africa and eventually the whole of Africa if we stick to this path of investing in new refineries, adopting a cost optimization initiative, building an environment that promotes competition, and creates a sustainable petroleum sector. These actions would lead to increased employment, reduced poverty, and reduced social inequity. We must take advantage of the opportunities brought by the African Continental Free Trade Area agreement (AfCFTA) and fully benefit from our barrels of crude, getting the maximum value it can bring Nigeria.

“MOMAN is calling for a national discourse among all stakeholders including Government, Labour, Civil Society Organizations, the Organized Private Sector, and Operators, not on the merits or demerits of petrol subsidy removal, but on the initiatives that can be taken to ease the impact of the subsidy removal on the most vulnerable in our society.”

He had also said: “The public, which includes the downstream operators, are key stakeholders in the Nigerian oil and gas industry. We believe that as a country, we have and should move beyond the debate on the arguments for the removal of petrol price subsidies. The discussion we should be having today is how best to maximise the benefits of the removal of price controls and subsidies while minimizing the adverse effects of this action on our citizens.”