FG finally ends subsidy on petrol

The Federal Government has officially ended the subsidy on premium motor spirit, popularly known as petrol.

The latest Petroleum Products Pricing template issued by the Petroleum Products Pricing Regulatory Agency does not contain the usual subsidy component.

The PPPRA is the government agency that regulates the prices of petroleum products in the country and its template has always offered insights into how the pricing of these products are determined by the regulators.

As of December 28 last year, the official pricing template for petrol by the PPPRA showed that the Federal Government subsidised the product by N6.45 per litre.

The Expected Open Market Price at that time was N93.45, which was N6.45 higher than the then retail price of N87 per litre.

On the revised template, the Estimated Open Market Price set by the regulator is now N84.78 for NNPC fuel stations and N85.1 for stations run by other oil marketer companies.

The EOMP is the summation of the landing cost of petrol and subtotal margins. Such margins include transporter’s cost, dealer’s charge, bridging fund, administrative charge, etc. The EOMP, therefore, is the true cost of the product.

Before the release of the revised template, the EOMP was usually higher than the retail/pump price of petrol at filling stations.

The difference between the retail price and the EOMP was what the Federal Government paid as subsidy to oil marketers.

However, the new EOMP is lower than the retail price of N86.5, which was set by the Federal Government as the amount at which petrol should be sold nationwide. The implication is that Nigerians are paying an extra N1.4 for the commodity whenever they buy PMS at non-NNPC run petrol stations and N1.22 extra for every litre of petrol bought at NNPC-run filling stations.

On the extra amount paid by consumers for the commodity, the Group General Manager, Corporate Planning and Strategy, NNPC, Mr. Bello Rabiu, while explaining the template, said that the negative subsidy would be remitted to the Petroleum Support Fund in line with the PPPRA guidelines.

He said, “The savings under such a regime could be domiciled in the PSF as a buffer to fund future subsidy (if any) that may arise during high oil price regime or invested by the industry in supply and distribution efficiency improvement projects such as decongestion of Apapa area, Single Point Monitoring in Port Harcourt and Warri, complimentary rail services, inland waterways, etc.”

The PPPRA, after getting approval from the Federal Government, had announced last Tuesday that retail filling stations belonging to the NNPC would from Friday, January 1, 2016 sell petrol at N86 per litre, while other oil marketers would sell the commodity at N86.5 per litre.