With crude oil prices currently above $60 a barrel, and a liter of petrol hovering between N162 and N165 per liter at filling stations, Nigeria government is said to be spending a whooping sum of N9 billion as subsidy on over 30 million liters of Premium Motor Spirit (PMS) consumes daily across the country. According to the Group Managing Director, Rainoil Limited, Gabriel Ogbechie, unless the downstream sector is fully deregulated, the Federal Government will continue to subsidise the sector to the detriment of other developmental projects in the country.
Speaking at the National Association of Energy Correspondents (NAEC) webinar conference, titled Deregulation and Sustainable National Energy Future Through Natural Gas, Ogbechie noted that NNPC has remained the sole importer of Premium Motor Spirit (PMS) and will remained so if the sector is not deregulated.
He explained that the Federal government paid N725 billion as petrol subsidy in 2019 and spent over N101.65 billion on subsidy in the first quarter of year 2020, stressing that with Covid-19, fuel subsidy was “discontinued” in March 2020 by the Petroleum Products and Pricing Regulatory Agency (PPPRA) following the crash in the global crude oil prices which led to price modulation of pump price of PMS.
“The pump price was moved from N145 per litre to N125 per litre as landing cost of PMS was N99.44 per litre. As crude oil prices recovered and PMS landing cost increased, PMS pump price were moved to N143.8 per litre in July 2020, N151.56/ltr in Sept 2020, N162/ltr in October and N165/ltr in November 2020. In February 2021, subsidy element “returned” as crude price hit $64/bbl and landing cost of PMS increased to N186.33/ltr (while pump price remained at N165/ltr)”
Ogbechie noted market fundamentals changed in March 2021 when crude oil price averaged $67/bbl, thereby increased landing cost of petrol to N189.61/ltr, with estimation that fuel subsidy will hit N102.96 billion at the end of the month.
He lamented that due to lack of clarity from the Ministry of Petroleum on the pricing regime (current and future) has resulted in inconsistent communications form industry agencies, increased speculation by marketers (buy-sell decision making), inconsistent supply of product, panic buying by the public as well as hike in transportation fares and product prices.