There are indications that the Federal Government may have returned subsidy payment on Premium Motor Spirit (PMS), using the supposed commercialised Nigerian National Petroleum Company Limited to manage the market shocks and maintain monopoly of the downstream segment of the nation’s oil and gas industry.
According to The Guardian analysis, about N318 billion (N10.6 billion) monthly losses are now recorded on petrol and may be calculated as under-recovery by the supposed NNPC Limited. Similar development had played out under the former administration of Muhammadu Buhari, where the government secretly returned subsidy and called it under-recovery in NNPC’s books.
Usually, the federation account suffers it. The fund is usually deducted before NNPC makes any remittance into the account meant for the three tiers of government.
Meanwhile, Vice President Kashim Shettima on Tuesday declared that the decision to end the petrol subsidy regime by the administration of President Bola Ahmed Tinubu was irrevocable.
Shettima, who spoke at the opening of the 16th Annual Banking and Finance Conference organised by the Chartered Institute of Bankers of Nigeria (CIBN), said the removal had already increased the amount of monthly revenues distributed among the federal, states and local governments to meet their financial obligations and enable them to serve the people better.
The revelation in The Guardian report comes weeks after President Tinubu said there would no longer be increase in pump price of PMS and days after NNPC’s Huub Stokman took over as Chairman of the Major Oil Marketers Association of Nigeria (MOMAN).
Some marketers also confirmed to The Guardian on Tuesday that the State oil firm is now subsidising through its access to foreign exchange.
In mid-August, Tinubu stated that despite the deregulation of the downstream market, the current petrol price would remain unchanged, as there are no immediate plans to raise fuel prices.
As at the last week of August, PMS was trading for $1,030.11 per metric tonne at the international market compared with the $859.25 it traded around July when NNPC increased pump price to an average of N617 per litre. This shows an increase of 19.88 per cent. The exchange rate in July was N820/$ but now N920/$, indicating a 12.19 per cent increase. The crude oil price in July was $78.50 per barrel, it traded for $88.50 per barrel in the last week of August. Yesterday, it hit the $90 mark.
Also, while the price per litre at the international market in July was $0.641, it stood at $0.792 in the last week of August. This means that the landing cost of PMS stands at about N728.64 per litre compared to the N529 it was in July.
The addition of freight costs, lightering costs (STS), distribution margin, ancillary costs by Nigerian Midstream Downstream Regulatory Authority (NMDPRA), Nigerian Port Authority (NPA) and Nigerian Maritime Administration and Safety Agency (NIMASA) as well as marketers’ margin stands at about N90 to N105.
By implication, the pump price of PMS should hover between N818 and N833 per litre depending on one’s city of residence. With these developments, the average subsidy on every litre is about N200 per litre. This is about N10.6 billion daily and N318 billion monthly.
As of yesterday, the pump price of PMS in Cameroon is N1,082.70 per litre, in Benin, it was N1,008.90, in Sierra Leone, it stood at N1,143, N1,037 in Togo, N1,047 in Ghana and N1,258.20 in Guinea.
When the current pump price is compared with other deregulated products in the country, diesel and kerosene are selling between N800 and N900 per litre. The price of kerosene/jet fuel at the international market as of last month of August is $1,036.60 per metric tonne, which was almost the same as PMS. Diesel at the international level traded lower during the period at $952.85 per metric tonne.
MOMAN, which had regularly provided a pricing update, had suspended it. A source at the organisation said there is an instruction not to share the update because the government has said there would be no price increase.
Although the exchange rate at the NAFEX window traded for N769.93 on Monday, many marketers said they are unable to source foreign exchange from the window and as such cannot import despite obtaining licenses from the Nigerian Midstream Downstream Regulatory Authority (NMDPRA).
“NNPC unofficially has been told to subsidise PMS through exchange rates. They are getting dollars from crude oil sales. It is their money they can decide to do with the exchange rate at N1 to $1 or N915 to $1, whatever they do, it is in their books, they aren’t looking for forex anywhere. But we marketers have to go out and look for forex, and it is this forex that is impacting on what we sell,” a top marketer, who pleaded not be mentioned, said.
He disclosed that if the situation persists, most marketers would be out of business in no time.
Vice President Shettima, while speaking at the 16th Annual Banking and Finance Conference, added that the administration was working towards a future where no leader would grumble over the lack of funds to pay salaries or complete projects.
The Vice President, who declared the meeting open, said Nigeria that the “sleeping giant of Africa has awakened from slumber”, and described Tinubu as a man of courage who is determined to redefine the concept of modern leadership.
He further stressed that the bold policy actions so far taken by the government including the foreign exchange convergence and subsidy removal were taken in the best interest of the economy.
Shettima said rather than the lack of potential, leadership remained the missing link adding that Tinubu was prepared to fill the gap.
He noted that the future of the country was in the ability of the youths to take advantage of digital technologies coupled with the country’s ability to apply value addition to raw materials for export.
With additional reports from The Guardian
