Business

Subsidy On Petrol, Kerosene Hits N4.5bn Daily

There are indications that the Federal Government is now spending about N4.5 billion to subsidize premium motor spirit (PMS), otherwise called petrol and House Hold Kerosene (HHK) otherwise called kerosene.

According to the data posted on the website of Petroleum Products Pricing Regulatory Authority (PPPRA) on Friday, subsidy payment on petroleum had risen from N45.28 per litre to N54.21 per litre while subsidy on kerosene is now N70.96 per litre.

The Nigerian National Petroleum Corporation (NNPC) had put average daily consumption of petrol at 40 million litres while that of kerosene is said to be about 33 million litres per day, gathered Tribune.

Multiplying the amount of fuel consumed across the country on a daily basis with the current amount spent on subsidizing the products, it means that the government spends about N2.17 billion on petrol subsidy and N2.34 billion on kerosene subsidy daily.

The PPPRA stated that the pricing templates were based on Average Platts’ Prices for July 9, 2015. With these calculations, the actual landing cost of petrol was N125.72 per litre.

The cost elements that make up the landing cost of petrol include the product’s offshore cost, N113.52; trade margin, N1.47; lightering expenses, N4.21; NPA, N0.77; financing, N1.96; jetty depot throughput charge, N0.8; and storage charge, N3.
On the cost of the product’s distribution margin, according to the agency, retailers get N4.6; transporters, N2.99; dealers, N1.75; bridging cost is N5.85; marine transport average, N0.15; and the admin charge, N0.15. The sub-total margin stands at N15.49.

When added to the landing cost of N125.72, an Expected Open Market Price (EOMP), which means the total cost of N141.21 per litre is arrived at. But after being subsidized with N54.21 per litre, a flat official rate of N87 per litre is given.

The cost elements that make up the landing cost of kerosene include offshore cost, N94.47, lightering expenses, N4.27; NPA charges, N0.84; Financing, N0.49; Jetty Throughput charges, N0.8 and storage charge is N3.

The distribution margin is same as that of petrol which was put at N15.49 per litre.

When added to the landing cost of N105.47 per litre, an EOMP of N120.96 is arrived at and after being subsidized with N70.96 per litre, an official rate of N50 per litre is given.

With the current figure of N4.5 billion daily subsidy payment, it means the country will spend about N1.6 trillion on subsidizing petrol and kerosene in 2015 while only N100 billion was provided for total subsidy in the 2015 budget.

Reacting to huge sum being spent on subsidy, the Chief Executive Officer, Financial Derivatives Company, Mr Bismark Rewane, said that the continued payment of subsidy was making it difficult for the government to have enough funds to run the country’s economy.

He said the country’s debt was rising, adding that the subsidy on petrol was not helping matters.

Rewane said: “The debt servicing burden is quite high. We are spending almost 25 per cent of our revenue to service debt, and again we have another large percentage that is spent on subsidy. When you consider all these, you will find out that there will be nothing left to run the economy.”

Leave a Reply