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.