The Nigerian National Petroleum Corporation has for months paid to maintain the retail pump price of petrol at N145 per litre, government sources say.
The Federal Government had in May 2016 through the petroleum products pricing regulatory agency, PPPRA, announced a new petrol price regime, which reviewed retail pump price band from between N86.50 kobo and N87 to between N135 and N145.
The adjustment was at a time global crude oil prices at the international market crashed to an average of $43.21 per barrel at the international oil market.
With crude oil prices per barrel improving to above $50, PPPRA sources put landing cost of petrol at about N160 to N165 per litre.
The elements of the landing costs in the PPPRA pricing template include freighting costs, lightering expenses, Nigeria Ports Authority charge, Nigerian Maritime Administration and Safety Agency charge, financing, jetty thru put charge and storage charge.
Apart from the landing cost, there are distribution margins, including those for retailers, transporter’ allowance, dealers, bridging fund, maritime transport average and administration charges, also added for conveying the products to the filling stations for retail to consumers.
With the retail pump price current at between N135 and N145 and landing cost at an average of N160 and N165 per litres, there is an outstanding of between N20 and N25 per litre.
The News Agency of Nigeria quoted an unnamed official of the NNPC as saying the national oil company had for several months been offsetting the difference between the landing costs and the pump price of petrol to sustain uninterrupted supply of the commodity.
“The landing costs of petrol currently hovers around N160 to N165 per litre,” the official said. “The petroleum products marketers buy from us (NNPC) and so the government bears the full cost of the extra cost as subsidy, because it feels it will be unfair to make the consumer pay the difference.
“With the current recession in the economy, the government will not want to burden the people with a fuel price hike.’’
The source said the NNPC and the government were also concerned by the recent upsurge of smuggling of petrol across the Nigerian borders to Chad and Niger.
Although the official noted the negative impact of scarcity of foreign exchange as a big issue in the fuel importation programme, he said no marketer had any right to divert fuel to any destination, as the NNPC sells virtually everything it imports to the marketers.
“NNPC is paying the difference just because it wants every Nigerian to have easy access to the white products. The fluctuating foreign exchange has not helped matters. But even the marketers cannot complain, because government bears the brunt of the whole thing,” the official said.
He however expressed concern that government may soon find itself overburdened by the subsidy overhang as the economy remained in recession.
“Soon the government may not be able to pay the price difference again, because it runs into billions of naira,” the official told NAN.
Recently, a senior official of the NNPC told PREMIUM TIMES government’s subsidy exposure was about N90billion so far.
The official, who would not want to named, because of the sensitive nature of the information, said the NNPC has continued to bear the burden, because President Muhammadu Buhari does not want to hear anything about subsidy payment any more.
When PREMIUM TIMES contacted NNPC spokesperson, Ndu Ughamadu, for clarification on Saturday, he said whatever cost the NNPC was paying was part of its roles as “supplier of last resort” and “social supplier.”
“I am not aware the corporation has ever told anybody that it was paying subsidy on fuel,” Mr. Ughamadu said. “NNPC, as you are aware, is a supplier of last resort. One of its primary objectives is to ensure that the nation is wet with (petroleum) products at all times.”
However, he pointed out that members of the Major Oil Marketing Association of Nigeria, MOMAN) and their Independent Petroleum Marketers Association of Nigeria, IPMAN, were not currently involved in the importation of petroleum products into the country.
“Only the NNPC is bearing the whole burden. And the NNPC has been dipping its hands into its lean purse to continue to provide for this important service to the economy,” he said.
Although he did not say how much the NNPC was drawing from ”its lean purse” to support importation of petroleum products into the country, Mr. Ughamadu was quick to point out that the extra expenses were not referred as subsidy, as it was part of its roles.
“We have two principal roles to play in the fuel supplier chain – as supplier of last resort and in a way social supplier, to ensure that no matter the situation the nation as not dry with products at all times,” Mr. Ughamadu explained.