Despite falling global crude oil prices as well as petrol prices, the Federal Government plans to spend another N55.98bn on petrol subsidy in 2015.
Figures from the Pipelines and Products Marketing Company, a subsidiary of the Nigerian National Petroleum Corporation, show that Nigeria consumes 40 million litres of petrol daily; and with the Federal Government’s recent resolution to pay N2.84 as subsidy per litre of petrol, over N113.6m will be payable daily as subsidy on the product.
Oil marketers currently borrow funds from banks to import the product on 30 to 35 per cent interest rate. This, therefore, means a daily interest of over N39.76m.
The amount payable as subsidy claims to marketers is a function of the real subsidy sum and the interest accrued. That, however, adds up as N153.36m daily petrol subsidy for 40 million litres of petrol consumed by Nigerians.
For a whole year (2015 in perspective), the country will be building a petrol subsidy debt profile of N55.98bn, despite over 60 per cent fall in Brent crude, which is the global oil benchmark.
But if the Naira continues to fall against the dollar in 2015, subsidy claims is likely to rise more, as oil marketers would add up the foreign exchange differentials to their subsidy claims from the nation’s coffers.
The Petroleum Products Pricing Regulatory Agency, on Wednesday, said the Federal Government was still paying a subsidy of N2.84 per litre of petrol despite the reduction of the pump price of the product from N97 to N87 on Sunday last week.
According to the petrol pricing template published on the PPPRA website on Wednesday, the Expected Open Market Price of Premium Motor Spirit, otherwise called petrol, is N89.84 per litre, while the regulated price is N87 per litre.
The PPPRA said the approved prices of petroleum products as reflected in the templates were from January 16, 2015.
According to the agency, the landing cost of petrol is now N74.35 per litre, while the ex-depot price is N77.66 per litre.
The Federal Government on Sunday night announced the reduction in the pump price of petrol by N10 per litre, attributing this to the decline in global crude oil prices.
Data from the PPPRA shows that when petrol was N97, just N0.90k subsidy was last paid on the product by the government. At the current N87, subsidy rose to N2.84, making some economics and petroleum experts in the country to question the rationale. Click to signup for FREE news updates, latest information and hottest gists everyday
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