Subsidy regime may have crept back following an increase in the landing cost of Petrol, National Daily investigation has revealed.
Checks revealed that the Nigerian National Petroleum Corporation, now responsible for about 90 percent of the importation of the product is currently bearing the latest subsidy cost on behalf of the government.
National Daily gathered that the cost of petrol stood at $560 per metric tonne or N127.36 per litre plus N7 per litre for freight as of Friday. The addition of the cost of the product with freight charge and other cost elements in the PPPRA template result in a landing cost of N145.09 per litre (using the official exchange rate of N305/dollar) or N222.33 per litre (using the parallel market rate of N490/dollar).
The Head of Energy, Ecobank Capital, Mr. Dolapo Oni, said, “I believe there is a subsidy, but it is not the subsidy being paid to marketers. It is the NNPC taking a loss so that marketers can sell at N145.”
“It is not sustainable because oil price could keep on going higher and the cost to the NNPC will increase. So, potentially, we expect a fuel price increase at some point. But to what extent, we don’t know. The ideal thing will be to raise the price.”
Recall that the Federal Government had on May 11, 2016, announced a new petrol price band of N135 to N145 per litre, a move that signalled the end of fuel subsidy.
The Petroleum Products Pricing Regulatory Agency, PPPRA, explained then that the rise in crude oil price and prevailing high cost of importation had brought back the subsidy.
The PPPRA, in its pricing template released following the introduction of a new price band, puts the landing cost and total cost of petrol at N122.03 and N140.40 per litre, respectively. The cost of the product and the freight rate, which are the elements most affected by crude oil price and exchange rate, were put at $534 per metric tonne of petrol or N111.30 per litre, using an exchange rate of N280/dollar.
The NNPC, in its latest monthly report, said it remained the major importer of petroleum products, especially the PMS, in spite of liberalisation of petroleum products and government’s intervention meant to ease marketers’ access to foreign exchange.