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FG funding petrol subsidy through crude oil sales proceeds – petrol marketers

FG funding petrol subsidy through crude oil sales proceeds – petrol marketers
  • PublishedMarch 18, 2024

There are indications that the Federal Government through the Nigerian National Petroleum Company Limited (NNPC Ltd) is now spending N17.72 billion daily to fund subsidy on petrol.

Though still shrouded in secrecy, the funding strategy is consummated by way of crude sales and direct cost recovery by NNPC.

According to Vanguard an executive of a major petroleum marketing company in Lagos hinted that the N17.7 billion subsidy cost represents the difference between landing cost of imported petroleum products and effective wholesale price to petroleum marketers.

Nigeria imports all the petrol it consumes and according to the Chief Executive, Nigerian Midstream and Downstream Petroleum Regulatory Authority, NMDPRA, Farouk Ahmed, daily petrol consumption in the country is around 44.3 million litres.

At current average deport price and exchange rate, the FG through NNPC may be incurring about N531 billion losses or revenue shortfall monthly.

This has now been reflected in the monthly Federation Account Allocation Committee, FAAC, reports.
The NNPC also deducts this shortfall from its remittances to the Federation Account, but the final distributable balance remains significantly higher than the pre-May 30, 2023 figures due to higher product prices.

President Bola Ahmed Tinubu had on 29th May, 2023, inauguration address declared that subsidies on petrol had ended. His declaration immediately led to a hike in the pump price of fuel to N480 per litre lower limit from N185 per litre. The upper limit was around N560.

Two months later, pump price moved again to over N600 per litre with NNPC Retail dispensing at N617 per litre in Abuja while independents and major marketers sold at N627 per litre. The upper limit in some locations hovered around N680.

See also  Gradual removal of petrol subsidy starts April —FG

Since then, while NNPC-owned stations and affiliates have maintained the N617 per litre rate, prices at the independents and major marketers have soared to N660-N680 per litre. In some states of the Federation the upper limit has gone up to N750.

Data clothed in secrecy
Efforts to get Finance Ministry’s official data on petrol import prices were rebuffed while the regular FAAC breakdown of remittances by NNPC has been removed from public communications contrary to the practice a year ago.

Also NNPC declined to release its information on petroleum imports saying that it is now running as a private company, and therefore not obligated to making its trading information public.
Contrary to the position of the FG, petroleum marketers have insisted that the current landing price is above N1,000 per litre, meaning the government was paying the difference.

According to them, the major cost determinant is the exchange rate which had seen the Naira depreciate by almost 200 per cent since the May 29, 2023 declaration.

NNPC Limited remains sole importer of the product as scarcity of foreign exchange killed the euphoria that greeted the passage of the Petroleum Industry Act 2021 that provided for deregulation of the downstream sector of the petroleum industry.
The Act was expected to usher in an era of free market in the downstream sector, where marketers will be able to import and sell at competitive prices.

Source; Vanguard.

Written By
Regina Robinson

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