Petrol Subsidy: FG Faces Problem of How to Keep Paying Difference
Petrol subsidy has returned. The Nigerian National Petroleum Corporation has been offsetting for months the difference between the landing costs of petrol and the pump price.
In series of interviews with key players in the sector, NAN can report authoritatively that the landing costs per litre of petrol is higher than the price Nigerians pay at the pump.
According to a source, who is a staff of the Ministry of Petroleum Resources, government being a listening one has been quietly bearing the differential.
“The landing costs hovers around N160 to N165. The marketers buy from us and so the government bears it because it feels it will be unfair to make the consumer pay the difference.
“With the current recession, the government will not want to burden the people with a price hike,’’ the source said.
Both the NNPC and the government are also concerned by the recent smuggling of petrol across the porous Nigerian borders to Chad and Niger, where a litre of petrol goes for over N400, compared to Nigeria’s N145.
A staff of the Petroleum Products Pricing Agency (PPPRA), who also preferred anonymity, said the marketers had no moral right to divert fuel meant for the people.
“For now Forex is a big issue,’’ the source said adding that “but the NNPC sells virtually everything it imports to them. So no marketer has any right to divert fuel.”
“If indeed the product is being sold for N400 in Niger Republic like you said, the Nigerian marketer has no right to look there.
“This is because 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 source reiterated.
However, a source at the NNPC fears that government may find itself overburdened by the subsidy as the economy is still caught in a web of recession.
“Soon the government may not be able to pay the price difference again because it runs into billions of naira”, said the source.
“Recall that at a workshop last year, an engineer with the corporation had said partial deregulation was unreasonable, he was right.
“The solution is full deregulation. Let the consumer feel it once and for all. This politics of walking around the problem won’t help at all’’.
On May 11, 2016 the Federal Government, through the PPPRA, had announced a new petrol regime of N135-N145 from its previous price of N97, which was heavily subsidised.
This increase led to various economic emergencies that affected all sectors and since Nigeria operates an oil-dependent economy, the impact was felt on external reserves, exchange rate, gross domestic product and inflation rate.
The Minister of State for Petroleum, Dr Ibe Kachikwu, had at the time said he would prefer to use the word liberalization rather than deregulation.
Kachikwu said the major plan of the Federal Government was to stop importation of petroleum products in the long term.
The global oil benchmark, Brent crude, which was trading around $41 per barrel when the petrol price was increased, is now $55.64 per barrel.
I hope this doesn’t deteriorate into another big national issue.