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Despite scarcity, daily subsidy on petrol hits N1.81bn

By on May 24, 2015

The Federal Government is still spending about N1.81bn daily to subsidise the Premium Motor Spirit, otherwise called petrol, notwithstanding the nationwide scarcity of the product.

Latest figures from the Petroleum Products Pricing Regulatory Agency show that the government is paying N45.28 as subsidy for every litre of petrol consumed in Nigeria.

Specifically, the agency, in its pricing template released on May 21, 2015, based on prices for May 20, 2015, stated that the Expected Open Market price or total cost for petrol was N132.28 per litre.

This was against a retail regulated price of N87 per litre. The difference between the EOMP and the retail price is therefore N45.28.

According to the Nigerian National Petroleum Corporation, Nigeria consumes about 40 million litres of the PMS daily.

Multiplying the amount of fuel consumed across the country on a daily basis with the current amount spent on subsidising the product, it means that the government spends about N1.81bn on subsidy daily, provided the N45.28 per litre subsidy figure persists.

The PPPRA stated that the effective date of the approved pricing template was January 19, 2015, noting that the actual landing cost of the product was N116.79 per litre.

The cost elements that make up the landing cost include the product’s offshore cost, N104.87; trade margin, N1.47; lightering expenses, N4.19; NPA, N0.77; financing, N1.68; jetty depot throughput charge, N0.8; and storage charge, N3.

On the cost of the product’s distribution margin, according to the agency, 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 N116.79, an EOMP of N132.28 per litre is arrived at. But this is subsidised and a flat official rate of N87 per litre is given.

Meanwhile, many independent marketers hardly sell at the regulated N87 price since the latest scarcity of petrol started.

Aside from the NNPC petrol stations and some outlets belonging to major oil marketers such as Conoil, Total, Mobil, Oando, Forte Oil, most other filling stations sell the product above the regulated price despite the fact that the subsidy by the Federal Government is still in place.

The scarcity of fuel has continued throughout the country.

In Abuja, many motorists spend quality man-hours in fuel queues, especially at filling stations where the product is sold at the regulated pump price.

Our correspondent, who monitored the situation in the Federal Capital Territory throughout last week, found that it was mainly petrol stations in the city centre that sold fuel at the regulated price.

Other stations in the satellite towns away from the city centre sold the product between N125 and N140 per litre, without any fear of being sanctioned by the Department of Petroleum Resources.

The situation worsened on Wednesday and Thursday in the city centre as virtually all stations in the town were closed.

On why fuel subsidy was not sustainable, a renowned economist and the Chief Executive, Financial Derivatives Company, Mr. Bismark Rewane, told our correspondent that the continued payment of subsidy was making it difficult for the government to have enough funds to run the country’s economy.

He said the country’s debt was rising, adding that the subsidy on petrol was not helping matters.

Rewane said, “The debt servicing burden is quite high. We are spending almost 25 per cent of our revenue to service debt, and again we have another large percentage that is spent on subsidy. When you consider all these, you will find out that there will be nothing left to run the economy.”

After paying N130 and above for a litre of petrol, some motorists, who spoke with our correspondent, also called for the removal of subsidy on petrol by the Federal Government.

Ayomide Abayomi, an official with a private security firm, stated that fuel marketers were getting richer at the expense of consumers, who empty their savings to fuel their vehicles and generators.

He said, “How can I pay N135 per litre and you are asking me if it is okay for the government to continue subsidising fuel? I don’t think there is still subsidy. But if there is, then this is the right time to stop it.”

Tobias Igbanugo, a resident of the FCT, also said, “Many people now know it is hard to get fuel at the regulated price of N87 per litre. If you want to buy at that price in Abuja, be ready to spend up to four hours in queue .

“A lot of us prefer paying the N140 for the product in most of the filling stations outside the city centre, than to spend quality time in queue. And you may end up spending such man-hours and still not get the product.”

When contacted, the Head of Operations, PPPRA, Mr. Victor Shidock, said, “I am not aware of that (N1.81m daily fuel subsidy). I cannot tell you about this and I’ve not been authorised to speak on it.”

 

 

[Punch]