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Fuel subsidy returns, as FG incurs N586m daily

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There are indications that the Federal Government has started incurring N586 million daily as fuel subsidy, following the rise in crude oil price from $49 to $58 per barrel in the international market between August and October this year.

Investigations by Vanguard showed that unlike in August this year, when refinery owners sourced their oil at $49 per barrel, the development has forced refiners to incur additional cost, which they passed on to importers, especially Nigeria that depends mainly on imported fuel to meet domestic demand.

The Petroleum Products Pricing Regulatory Agency, PPPRA, that has the mandate to work towards ‘attaining a strong, vibrant downstream sub-sector of the petroleum industry, where refining, supply, and distribution of petroleum products are self-financing and sustaining’ has stopped publishing its template to guide stakeholders since 2016.

PPPRA spokesman, Mr Lanre Oladele, confirmed there was subsidy but promised to give the figures, which he couldn’t do weekend. But Vanguard survey of major markets around the world showed that marketers have started experiencing under recovery, meaning they get less than their cost of importing the product. While it cost $1.70 per gallon, amounting to N140.14 per litre at the New York Harbour, it also cost $550 per tonne, amounting to N125.05 per litre at Rotterdam based on the nation’s N305 to a dollar exchange rate.

Investigations also showed that marketers traders incur other cost such as littering expenses (N4.56 per litre), NPA charges (N0.84k), NIMASA (N0.22k), Financing (N2.57k), Retailers margins (N6.0), transportation cost (N3.36), Dealers margin (N2.36), bridging fund (N6.20), administrative charge (N0.30k) and marine transport average (N0.15k), amounting to N26.56 per litre.

This showed that the total cost of importing fuel from the global market ranged between N150 and N161.75 per litre, depending on location of the market, thus culminating in an under recovery of N16.75 per litre. Consequently, the government’s subsidy amounted to the N586 million as a bulk of the estimated about 35 million litres per day estimated national demand is imported from the global market.

Commenting on the development, Mr. Dolapo Oni, Head, Energy Research of Ecobank Development Company, EDC, Nigeria Limited disclosed in an email to Vanguard: “Instead we have NNPC selling petrol below its landing cost so the price remains at N145. Thus, there is an under-recovery, which is recognised in their finances.”

Mr. Ndu Ughamadu, Group General Manager, Group Public Affairs Division of the Nigerian National Petroleum Corporation, NNPC, also stated in a telephone interview that: “We are not so sure, but the corporation is into commercial activities.” Subsidy may continue Meanwhile, there was an indication that fuel subsidy may continue to rise following expected increased stability of the market in the remaining part of the year, thus imposing much burden that has found it difficult to settle an outstanding of N800 billion subsidy to marketers.

Vanguard, October 23, 2017

 

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0 Comments

  1. seyi jelili

    October 23, 2017 at 5:48 am

    Hmmmmmmm, I don’t understand why corruption lies heavily in the petroleum sector and our president is the federal minister of petroleum, issue of Nnpc MD with $25bn still pending, now the cabals are stealing money through subsidy that has been removed, can we now see that Jonathan’s government is better to buhari government

    • JOHNSON PETER

      October 23, 2017 at 6:09 am

      But you desire the change now, let’s enjoy the change till when we are tired of it

  2. Anita Kingsley

    October 23, 2017 at 9:25 am

    I thought they once said subsidy is corruption, how come Buhari has decided to allow it return to the sector?

  3. Animashaun Ayodeji

    October 23, 2017 at 9:35 am

    Subsidy has returned and fuel is still expensive. The previous subsidy didn’t inflate the ricenof fuel, it reduced it instead, how come this current subsidy hasn’t improved the price of fuel?

    • Abeni Adebisi

      October 23, 2017 at 9:52 am

      This to tell you subsidy remains corruption as usual. Buhari’s government is worst.

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