The subsidy on Premium Motor Spirit, popularly known as petrol, may have gulped at least N11.20bn in one week as the rise in global oil prices pushed up the landing cost of the product.
On February 5, when oil price neared $60 per barrel, the expected open market price of petrol rose to over N200 per litre, based on the petrol pricing template of the Petroleum Products Pricing Regulatory Agency.
The product is currently being sold at between N160 and N165 per litre at many filling stations in Lagos. Using an expected open market price of N190 per litre of petrol and an average current pump price of N162 per litre indicates a subsidy of N28 per litre. With a daily petrol consumption of about 57 million litres and a subsidy of N28 per litre, it means subsidy gulped N1.60bn in a day and N11.20bn in a week.
With a daily petrol consumption of about 57 million litres and a subsidy of N28 per litre, it means subsidy gulped N1.60bn in a day and N11.20bn in a week (February 5 to 12).
Crude oil price accounts for a large chunk of the final cost of petrol, and the deregulation of petrol price by the Federal Government last year means that the pump price of the product will reflect changes in the international oil market.
The rising price of crude oil pushed the cost of petrol quoted on Platts to $543.25 per metric tonne (N157.99 per litre, using N390/$1) last Friday from $480.25 per MT (N139.67 per litre) on January 7.
The international oil benchmark, Brent crude, extended its rally on Monday, rising by $0.88 to $63.31 per barrel as of 7:10pm Nigerian time.
The Nigerian National Petroleum Corporation, which has been the sole importer of petrol into the country in recent years, is still being relied upon by marketers for the supply of the product despite the deregulation of the downstream petroleum sector.
The Minister of State for Petroleum Resources, Chief Timipre Sylva, said last week that Nigerians should prepare for the pain associated with the increase in crude oil price.
According to him, as desirable as the increase in oil price is, it has serious consequences as well on petroleum product prices.
“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.”
The NNPC said in its latest monthly report that to ensure continuous increased PMS supply and effective distribution across the country, a total of 1.72 billion litres of PMS, translating to 57.44 million litres per day were supplied in November.
The corporation said it had continued to diligently monitor the daily stock of PMS to achieve smooth distribution of petroleum products and zero fuel queue across the nation.
Reps condemn $750m annual loss to gas flaring
Meanwhile, the House of Representatives says Nigeria is losing about $750m to gas flaring annually. It added that the flared gas could have been used to generate electricity for the country. The Federal Government has, however, said it is committed to eliminating gas flaring by 2025.
According to the government, ending gas flaring will allow the country to harness its gas resources for maximum economic benefits and in compliance with the Paris Agreement of the United Nations Framework Convention on Climate Change. The joint House Committee on Gas Resources, Environment and Climate Change organised a public hearing on the need to end gas flaring in the country in Abuja on Monday.
Chairman of the House Committee on Gas Resources, Nicholas Mutu, said available records showed that the country was losing $750m annually from flared gas. Mutu said, “Gas flare is a malady that we must work together to eliminate at the shortest time possible because of its all-round adverse effects on the environment and socioeconomic wellbeing of the people of Niger Delta region, as well as on the fiscal measures of the Federal Government. “At current estimates by PricewaterhouseCoopers, Nigeria loses over $750m in annual revenue from flared gas’’.