Daily subsidy on PMS rises to N1.7bn

Daily subsidy on Premium Motor Spirit, otherwise known as petrol, to be paid by the Federal Government has soared to N43.25 per litre, up from N2.84 as of January 21, 2015, data obtained from the Petroleum Products Pricing Regulatory Agency has shown.

According to the PPPRA, the Expected Open Market Price of PMS is N130.25 per litre as of April 28, 2015. This means that N43.25 is the subsidy cost that the government is picking up on every litre of the product as consumers are buying it at the regulated price of N87 per litre.

Based on daily petrol consumption of 40 million litres in the country, according to figures from the Pipelines and Products Marketing Company, total subsidy cost on the product as of Tuesday, April 28 amounted to N1.73bn at N43.25 per litre.

The EOMP of PMS was N128.96 per litre as of April 24, while subsidy was N41.96 per litre, according to the PPPRA.

Subsidy refers to the money paid, usually by the government, to keep prices below what they will otherwise be in a free market system.

The PPPRA had on January 21 put petrol subsidy at N2.84 per litre three days after the Federal Government reduced the pump price of petrol to N87 per litre following the plunge in global benchmark Brent crude.

With the price of Brent crude, against which Nigeria’s oil is priced, rising to $65.55 on April 24, 2015, the amount payable by the Federal Government to oil marketers went above the N40 per litre mark. Brent crude fell to $64 per barrel on Tuesday and traded around that price on Wednesday.

The Federal Government had on January 18, 2015 announced the reduction in the pump price of petrol from N97 to N87 per litre, attributing this to the decline in global crude oil prices.

Nigeria, Africa’s top oil producer, relies on importation for most of its fuel needs as the country’s refineries are in a poor state.

Last week, oil marketers under the aegis of Major Oil Market Association of Nigeria and Depot and Petroleum Products Marketers Association, restated their complaints over the delay in the payment of subsidy arrears by the Federal Government, putting subsidy arrears owed by the Federal Government at N356.2bn.

They said out of this amount, the Federal Government had made provision for N100bn in a Sovereign Debt Note (a post-dated financial instrument), which is expected to mature at the end of April 2015, adding that the remaining N256.2bn comprised actual subsidy arrears for part of 2014 (batch T and U) and 2015 (batch A and B) and the foreign exchange differentials cum bank interests.

The actual subsidy for the period was put at N40.3bn while the value of the foreign exchange differentials and accrued interest was put at N215.9bn.

The Executive Secretary, MOMAN, Mr. Thomas Olawore, said members were increasingly finding it difficult to continue importation of petrol for a while now, and that though it was the wish of MOMAN and DAPPMA to continue to import owing to the efforts committed to the exercise, market situation had continued to get tougher.

MOMAN had recently in a letter addressed to the Minister of Finance, Dr. Ngozi Okonjo-Iweala, through its Executive Secretary, Mr. Thomas Olawore, stated that despite previous assurances from the government to reimburse the marketers for under recovery as verified by the Petroleum Products Pricing Regulatory Agency, it had failed to honour the agreement.

The association said the industry to date had only received approximately N30bn in foreign exchange differential claims out of the N100bn owed.

“In the same vein, only N345bn has been received in core subsidy payments, covering payments up to the second quarter of 2014.

“Specifically, only three companies out of the six MOMAN companies received payments for forex differentials and no company, MOMAN or Depot and Petroleum Products Marketing Association, has been paid interest charges on delayed payments.”