Govt spends N1.69bn daily on petrol subsidy

While the federal government is yet to decide what to do with the subsidy regime, the bill continues to pile up, as Nigeria’s current daily subsidy debt hits N1.69bn daily on petrol despite the resultant squeeze on the nation’s revenues.

Buhari had last Monday explained that he had yet to take a decision on the removal of subsidies on refined petroleum products.

Debates have been ongoing as to the whether or not government should dump the subsidy on petrol and allow market forces determine the price of the product.

While industry experts and some politicians canvass the stoppage of the subsidy regime, ruling government usually consider the political gains of the policy. But experts told Punch that this was detrimental to Nigeria’s economy, considering the whopping sum being spent daily subsidising petrol consumption.

Latest figures from the Petroleum Products Pricing Regulatory Agency show that the government is paying N42.35 as subsidy on every litre of petrol consumed in the country.

Specifically, the agency, in its pricing template released on Thursday July 16, 2015, which was based on average Platts prices for a day before, stated that the Expected Open Market Price or total cost of petrol was N129.35 per litre.

This is against a regulated retail price of N87 per litre. The difference between the EOMP and the retail price is, therefore, N42.35.

According to the Nigerian National Petroleum Corporation (NNPC) the country consumes about 40 million litres of Petrol daily.

By multiplying the volume of petrol consumed across the country on a daily basis with the current amount spent on subsidising the product, it means that the government spends about N1.69bn on subsidy daily at N42.35 per litre.

The PPPRA stated that the effective date of the approved pricing template was January 19, 2015, noting that the actual landing cost of the product was N113.86 per litre.

Read also: Afenifere, Ohaneze differ on fuel subsidy removal

The cost elements that make up the landing cost include the product’s offshore cost of N102.6 per litre; trade margin, N1.47; lightering expenses, N4.18; NPA fee, N0.77; financing, N1.59; jetty depot throughput charge, N0.8; and storage charge, N3.

On the product’s distribution margin, retailers get N4.6; transporters, N2.99; dealers, N1.75; bridging fund, N5.85; marine transport average, N0.15; and admin charge, N0.15; making a subtotal margin of N15.49.

When added to the landing cost of N113.86, the EOMP of N129.35 per litre is arrived at, but the product is sold at filling stations at N87 per litre.

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