Another fuel scarcity looms over subsidy payment

With an estimated N1.149, 385 trillion expected to go into the payment of subsidy in 2019, and mere N305 billion allocated for the purpose in the 2019 budget proposals, the country may run into a massive budget deficit if nothing is done about the development.

A breakdown shows that at the prevailing $2.54 per gallon of fuel in the United States, which translates to N774.7 at the official exchange rate of N305 to $1, a litre of petrol in the country costs N193.68 on the average.

Going by the last pricing template released in 2018 by the Petroleum Products Pricing Regulatory Agency (PPPRA), additional cost elements of N14.3 per litre is required to cover the retailers’ margin, bridging fund, dealers’ cost and transporters’ pay.

Thus the landing cost of petrol in the country currently is N207.98. This implies that government currently pays N62.98 subsidy per litre of petrol.

The Nigeria National Petroleum Corporation (NNPC), which has since deployed subsidy as part of its operational costs, as the last resort of supply line as enshrined in the NNPC Act 1977, defrays an estimated N3.149b per day under what is tagged “under-recovery.” The sum of N3.149b per day therefore implies that the country is projected to spend N1.149, 385 trillion in 2019 on petrol subsidy.

The Group Managing Director of NNPC, Dr. Maikanti Baru, last year said that the country’s daily consumption of petrol was 50 million litres. This daily national consumption figure was also at the weekend confirmed by the acting General Manager, Corporate Services of the Petroleum Products Pricing Regulatory Agency (PPPRA), Kimchi Apollo.

Principal Consultant to the National Assembly on Oil and Gas Industry Reform, Dr. Francis Adigwe, warned that the current subsidy regime is not sustainable, saying government must exit a regulated downstream sector.

His words: “Government needs to liberalise the downstream sector. Nigeria has an oil and gas industry that will not grow as long as government continues to subsidise products. The importation ensures the value-added that will provide employment and rejuvenate the economy is completely lost.”