Nigeria's foremost Online Energy News Platform

FG may increase fuel price after election

There are fresh indications that the Federal Government may have concluded plans to increase the pump price of Premium Motor Spirit (PMS), popularly called petrol, from N145 per litre to between N185 and N200 per litre shortly after the forthcoming general elections, Daily Sun findings  have revealed.

If implemented, the new petrol price regime would be coming three years after a similar increase on May 11, 2016, from N86 to N145 per litre. A member of the Major Oil Marketers Association of Nigeria (MOMAN), who spoke in confidence to Daily  Sun, said all arrangements to abolish subsidy, also known as under-recovery, have been concluded.

The source explained further that the N305 billion budgetary provision for subsidy in this year budget is a pointer that the Federal Government is likely to foreclose subsidy in 2019.

‘‘If you have followed the history of subsidies in this country, you will discover that the figures keep growing every year. It never drops but rather balloons,’’ she said.

She disclosed further that the N305 billion set aside for subsidy in 2019 was deliberate and a far cry from the N1.4 trillion expended in 2018, adding that government was fully aware that the figure cannot take the country beyond first quarter of 2019, after which fuel price would be increased.

‘‘With this strategy, we would have been back to the old cycle of going in and out of subsidy when crude oil prices and exchange rate go up. What I would have preferred is to have reforms that would put the downstream sector on the path of sustainability,’’

Giving the current landing cost of petrol, if the Federal Government stops subsidizing the price of PMS today, the actual selling price of PMS would rise to N165 per litre.

The N165 per litre cost is without the 14 items currently listed in the petrol pricing template which when added will put the price of petrol at about N200 per litre.

Some of the 14 items included; Petroleum Equalization Fund (PEF) charges, transporters margin, lithering expenses, Nigerian Ports Authority(NPA) charges which is paid in dollars, NIMASA levies among others.

Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mr. Maikanti Baru, had last December, disclosed that under-recovery of petrol, has dropped to N20 per litre from over N80 a couple of weeks back, noting, however, that the Federal Government was still committed to bearing the additional cost above the regulated price of N145 per litre.

Baru, said the corporation was not deterred by the rising cost of under-recovery and would continue to import PMS into the country to guarantee stability in supply.

Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, says subsidy on petrol currently costs the Federal Government N1.4 trillion annually.

According to him, this was because NNPC singlehandedly imports fuel into the country and bears the cost that arises there from.

The federal government had in August 2016 said it saved N1.4 trillion by not paying oil subsidy.
Kachikwu had said government made a savings in excess of N1.4 trillion since subsidy was removed from petrol in the early part of 2016.

The MOMAN source regretted further, that rather than government to concentrate its efforts towards reforming the downstream sector, it was more interested in setting aside subsidy.

She said government should place in place mechanisms that would engender discussions among all stakeholders in the downstream sector which will eventually led to the deregulation of the sector.

According to her, the incursion of too many briefcase businessmen in the downstream sector was a major disincentive to serious players who have invested so much in asset acquisition but are now operating far below their capacity utilization due to the activities of rent seekers.

‘‘Subsidy is fraud. Sometimes they say the fraud associated with subsidy is perpetrated either by government or marketers. The people who are supposed to be gate keepers eventually become rent seekers. The genuine business owners do not like subsidy because they don’t like giving back because such kick backs affects their bottom line

She said such savings could kick-start the “long overdue process of revamping critical infrastructure in the downstream sub-sector such as pipelines, refineries and tank farms,”.