As the Federal Government continues to subsidise the price of petrol, it incurs a minimum of N102.5 billion monthly to reduce the retail cost of petrol.
The sum is higher than the N70 billion the government budgeted for the provision of Universal Basic Education (UBEC) in the 2021 budget, as well as the N45.19 billion allocated for immunization.
This analysis was drawn from the controversial price template released by the Petroleum Products Pricing Regulatory Agency (PPPRA) last week.
The agency came under attacks last Thursday when it released a template indicating a huge jump in the retail price of petrol from about N160 to N212.
The decision contradicted earlier assurances by the NNPC that there will be no increment in March, prompting the government to disown it and apologise.
In a statement, released today, its executive secretary, Abdulkadir Saidu, the PPPRA said it does not “fix or announce prices”, and claimed the petroleum pricing template published on its website was not intended to cause an increase in the price of petrol.
However, previous templates released by the agency formed the basis of fuel price increase or decrease in the country.
Prior to latest controversial announcement, the PPPRA published its last template in November 2020.
In his reaction, the Minister of States for Petroleum, Timipre Sylva, also disowned the increment.
Sylva said neither he nor President Muhammadu Buhari had approved the decision to increase the retail price to N212 per litre.
The NNPC also insisted its position had not changed and the PPPRA later deleted the post from its website.
‘New Revelation’
Aside the controversies it generated, the new template released by the PPPRA also revealed details of the subsidy the Nigerian government effectively incurs.
In its pricing guide for March, the PPPRA put the wholesale margin at N4.03 per litre, administration charge at N1.23 per litre, transporters’ allowance (NTA) at N3.89 per litre, Bridging Fund cost at N7.51 per litre, and Marine transport average (MTA) at N0.15 per litre.
The agency said the expected ex-depot price for wholesale products marketers would be N206.42 per litre.
Further review of the pricing template showed the average price per ton of the commodity was put at $561.96, or N169.22 per litre, while the average freight rate coat (North-West Europe to West Africa) is $21.63 per ton, or N6.51 per litre.
With a retailers’ margin of N6.19, the new guide showed that the expected retail price would be N209.61 on the lower band and N212.61 on the upper band.
Further analysis showed that the difference between the N206.42/litre ex-depot price announced by the PPPRA and the N148/litre price petrol is sold to marketers by NNPC reveals a subsidy of N57.82/litre.
The amount of petrol Nigerians consume daily has been a subject of conjectures in recent years, as figures released by different agencies often conflict.
The NNPC in its operational report said Nigeria consumes about 57.4 million litres of petrol daily.
In February, the Department of Petroleum Resources, DPR, put national demand for petrol, also known as petrol, at 38.2 millionlitres daily.
Last year, the nation’s statistics bureau said Nigerians consumed 20.8billion litres of petrol in 2019, which comes to about 57.2million litres every day. NBS cited data provided by the Petroleum Products Pricing Regulatory Agency, which it said it verified.
However, using the NBS’ conservative figure of 57.2 million litres, spread across a 31-day period, it can be gleaned that the NNPC will be spending about N102.5bn as petrol subsidy monthly.
For years, the government denied it paid subsidy on petrol, yet it did so through the NNPC, which described the cost as “under recovery”.
Meanwhile, the cost is subject to the dynamics in the international oil market. It means that should there be an increase in the price of oil, as being projected by analysts, the subsidy cost is also bound to increase, just as a slump would also lead to reduction in subsidy cost.
‘Subsidy’
In March 2020, amid a global oil price crash, Nigeria cut its pump price and said it had eliminated subsidies.
The government also announced a new price cap that maintained government control, but said it would allow prices to move with the market.
Nigeria’s petrol prices had been kept artificially low at N145, with subsidy eating into a huge chunk of government revenues.
However, by June 2020, the NNPC recorded a N5.34 billion ($14 million) cost for fuel, raising suspicion that subsidy had not returned to the government’s books.
Until recently, the government has not come out clean on how much it injects into subsidy payment, even as the item is not contained in recent budgets.
Some Nigerians have called for the removal of subsidy, in order to enable the government invest the fund into other developmental projects. Others have however condemned calls for its removal, citing it as perhaps one of the most significant “benefits” the masses enjoy from the government. Those in the latter category, such as the organised labour, have advised the government to fix the refineries before removing fuel subsidy.
Many have also expressed worry over the government’s sincerity, and wondered whether the government would indeed commit funds generated from subsidy removal into actual developmental projects.
Nigerians typically use petrol to power their vehicles, tricycles, and motorcycles, and in a country with poor electricity supply, other Nigerians in their millions power their generators with petrol.
A study supported by the British government estimated that Nigeria spent N10 trillion on subsidies from 2006 to 2018, more than the budgets for health, education or defence.
