The Federal Government has resorted to subsidy regime following an increase in the landing cost of Premium Motor Spirit, also known as petrol.

This is coming about eight months after the Muhammadu Buhari-led regime stopped the fuel subsidy, which was costing the government millions of naira being paid monthly to oil marketers importing the product then.

Investigation on Friday showed that the Nigerian National Petroleum Corporation, now responsible for about 90 per cent of the importation of the product, is currently bearing the latest subsidy cost on behalf of the government.

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 explained then that the rise in crude oil price and prevailing high cost of importation had brought back subsidy.

The PPPRA, in its pricing template released following the introduction of a new price band, put 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 mostly 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.

Global oil benchmark, Brent crude, which was trading around $41 per barrel when the petrol price was increased, stood at $55.64 per barrel as of 5.15pm on Friday.

Crude oil price accounts for about 80 per cent of the final cost of fuel, the PPPRA said, in its framework for petroleum products supply, distribution and pricing.

Our correspondent 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 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 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.

In the past, marketers were importing 70 per cent of the products while the NNPC was importing 30 per cent, being the supplier of last resort.

Most of the marketers have yet to resume importation of petrol and continued to rely on supply from the NNPC, which sells to them at N131 per litre.

An ex-top executive of the PPPRA, who spoke with our correspondent on condition of anonymity, said, “If the landing cost is more and somebody is bringing the product in and others are not, it means definitely that person, who is bringing it, is running at a loss somehow. So, if you now call that subsidy, it is okay.

“The NNPC is definitely subsidising the product; it is a loss to them also because they get the money from somewhere.”

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. That’s a fair system right now because it is better than paying marketers at the same time.

“But 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.”

Asked if the NNPC was subsidising the product being imported, the Group General Manager, Group Public Affairs Division, NNPC, Mr. Ndu Ughamadu, could not comment on it, saying only the PPPRA was in the position to give information about the landing cost of petrol.

Last week, oil marketers under the aegis of the Independent Petroleum Products Importers said they owed some Nigerian banks over $1bn used for the importation of petroleum products, with accumulated interest of N160bn.

According to them, they are unable to pay because the sums they owe the banks form part of what they are in turn owed by the government.

The marketers said the government’s debt arose from the petrol subsidy scheme whereby the Federal Government entered into a contract with the IPPI, mandating its members to import and supply petrol to the market on condition that it would pay to the body the difference between the landing cost and pump price as fixed by the government, provided that the landing cost was higher than the selling price.

It said, “When the selling price of petrol was increased from N97 to N145 per litre in May 2016, it was based on an exchange rate of N285/$1, resulting in a 45 per cent increase. On June 20, 2016, the naira was devalued from N285/$1 to N305/$1, which is an increase of seven per cent, but the fixed pump selling price of petrol has not been increased. This means that petrol must be subsidised.”

http://investorsking.com/fuel-subsidy-returns-as-landing-cost-hits-n145/

Lalasticlala Mynd44 seun Dominique

They should spare us these lies. it is obvious they are bent on price increase so let them do it.

It is our fault. How can a country with over 20m graduates decides to vote for an illiterate?

Not news anymore

God will save Nigeria...
ITS OFFICIALLY MY BIRTHDAY... SHOW ME SOME LOVE...

Hmmm....abeg make everybody contribute 100# each make dem take am repair our refinery....

The only thing I saw up there is that the Federal Government is about to give subsidy to itself through the phoney NNPC since it imports over 90% of the products.
How did we end up to this nonsense?
Who sent this man to punish and set us back in 21st century?

Confused sets of people ruling over us.

Jesuuuuuu by the time APC finished with us ... Our brain would be reset back to normal

By the way , where is ibe kachiki

Where is olusegun baba sanjo

President Odun n Baku Buhari


Fashola where are thou

Tinubu will remain silent for ever

Interesting.

Government of trial and error.

This govt is a deceitful and propagandist govt. Secondly, where has Lai (Liar) Mohammed been?

alright pmb

Buhari keep the change and leave us alone

Hmm

It's well

Buhari should just increase the fuel price so any Thomas still doubting will be sure they voted a failed leader shikena

Blawd of Gawd

Buhari 's Presidency has exposed our hypocrisy and cowardice.

We are just watching in 7D.

buhari matter?


ahaf tire

I just love Nigeria

Happy biiday slimsce

And me too


As for the fuel subsidy ,we know the crew to invite

world oil prices would go up, Nigeria's pump price would still increase

when oil prices appreciates,the pump prices still goes up

how long would it take to fix the refineries

is it so so difficult

I see no changes

After importing nnpc now sells to marketers at #131 why things no go head for naija.smh................

9ja we hail thee

T

There's nothing wrong in what's happening.

Let me quickly clarify before dumbass analyst start talking nonsense.

Where we were

Sometime in December, 2015 the price of crude oil per barrel dropped to about $32 and the exchange rate then was less than N300 to 1$. At that time, the government. Marketers were making profit, without subsidy being paid.

2016 first quarter

By mid January, the price of crude oil started rising, and that was the time CBN started their failed policy on exchange rate. What happened then was that as the crude oil price increased, exchange rate to dollar also increased. This made landing cost of refined products to go up. You would recall that we experienced scarcity till May, 2016 when subsidy was finally removed. Why? Cos product was sold. (PMS) at N87 per litre and the differential was paid to marketers as subsidy.

May, 2016

Subsidy was removed. Exchange rate is now over 300 naira to a dollar. Hence we started buying PMS per litre at N145.

NOV, 2016

International price of crude oil rose to $50 per barrel and exchange rate is over N400. The landing cost would automatically increase. But since PMS price is still being regulated and pegged, no marketer would import a product at N145 per litre and still sell below cost price.

JAN, 2017

In order to avoid two things

1) Fuel Scarcity
2) Increased PMS price

NNPC is now importing 90%. of daily consumption of PMS so that Nigerians would not suffer.

So I wonder how some dunce will insult NNPC, when they're actually saving you.

The only solution now is for CBN to do something about the exchange rate and things would be back to normal.

Price not per barrel is about $53-54 and exchange rate is over N400 naira.

Price may remain $54 or even go higher as we pray and hope for. CBN must do something about the exchange rate and allow drop back to 300 or below. If this is done, things would balance up

Dem think say to rule nigeria na to dey run mouth.

After we say we go school, we are graduates, now see what we have caused ourselves,. . . Shame on us, shame on those that voted, shame on the nation hope we all are feeling it now. . . Rubbish

Confused Government.