The Federal Government spent a total N650.2bn in subsidising Premium Motor Spirit; latest statistics obtained from the Nigerian National Petroleum Corporation have shown. The PMS, popularly known as petrol, is imported into Nigeria solely by the Federal Government-owned NNPC.
The corporation subsidises the commodity to ensure that it is not sold above N145 per litre at filling stations across the country. The NNPC, however, classifies its subsidy spending as under-recovery as it has repeatedly argued that only the National Assembly can approve subsidy.
Under-recovery is the additional cost that the NNPC is incurring in subsidising the price of petrol in order to ensure that it is sold at the regulated price of N145 per litre, even when the real market price is above this regulated rate.
Findings from the oil firm’s most recent monthly financial and operations report obtained in Abuja on Sunday showed that the government spent N650.2bn in subsidising petrol from April 2018 to March 2019.
On the monthly subsidy expenses, statistics from the report showed that the corporation spent N52.5bn, N60.6bn, N80.2bn, N51.2bn, N65.9bn and N45.8bn in April, May, June, July, August and September 2018, respectively. In October, November and December 2018, the government, through the NNPC, spent N40.5bn, N2.9bn and N13.3bn, respectively. For January, February and March 2019, it spent N104.3bn, N102.3bn and N30.6bn, respectively.
A further analysis of the report showed that the highest amount of N104.35bn was spent on subsidy in January 2019. This was followed by the N102.34bn that was spent in February this year, while the lowest sum spent on subsidy was the N2.88bn expended in November 2018.
Although the NNPC’s latest report did not capture subsidy expenses by the oil corporation beyond March 2019, findings by our correspondent showed that the corporation would have spent about N308bn on subsidy in the second quarter of 2019.
This is because by importing 5.61 billion litres of the PMS into Nigeria in the second quarter of this year, the corporation would have incurred about N308.6bn as subsidy.
Figures from the National Bureau of Statistics showed that the volume of the PMS imported into Nigeria rose by 15.2 per cent in the second quarter of this year to 5.61 billion litres.
Since 2017, the NNPC has been the sole importer of petrol, as other oil marketers stopped importing the commodity due to the high landing cost of the product when compared to the N145 per litre approved pump price at filling stations.
Oil marketers told our correspondent that the landing cost of petrol in Q2 2019 revolved around N170 and N200 per litre. They explained that the fluctuation was due to the changes in global crude oil prices.
In May this year, for instance, the Executive Secretary, Depot and Petroleum Products Marketers Association of Nigeria, Olufemi Adewole, stated that most marketers were not importing PMS because it was impossible to make profit, considering the price at filling stations.
He said, “If the margins cannot cover my cost viz-a-viz landing cost of the product, that means it is not profitable. For instance, as of May 11 or around that time, the landing cost of PMS was over N200 per litre.
“Now, are you telling me to bring in a product that sells above N200 and you want me to sell at N145?”
At about N200 per litre landing cost and N145 per litre approved filling station price, it means that the NNPC would have been subsidising every litre of the commodity by about N55, particularly during some months in the second quarter of this year.
This implies that for the 5.61 billion litres that was imported in the second quarter of this year by the corporation, it would have spent about N308.6bn as subsidy on petrol.
Apart from private oil marketers who, at various occasions, had called for the liberalisation of the downstream oil sector by putting an end to subsidy, other stakeholders within and outside the oil sector share similar view.
The President, Constance Shareholders Association of Nigeria, Shehu Mikhail, condemned the government’s continued spending on petrol subsidy.
He argued that few persons rather than the masses were benefiting more from petrol subsidy.
Mikhail said, “The government should stop fuel subsidy. The money they use in subsidising petrol should be deployed in fixing other arms of the economy like health, education, infrastructure, etc.
“This is because only a few people truly enjoy the benefits of this subsidy. The larger masses are just managing to enjoy it. We are an oil-producing country; why are we importing petrol?”
He added, “Tell me, how can we measure the impact of subsidy on the economy? It has to stop. We can’t continue paying billions on it when we can’t measure its impact.”
A former President, Association of National Accountants of Nigeria, Dr Samuel Nzekwe, told our correspondent that subsidy payments were not necessary at this time, considering the plunge in the price of crude oil globally.
Nzekwe explained that the fall in crude oil price must have reduced the subsidy burden on the Federal Government and advised that the practice should be discontinued.
“Crude oil price has been fluctuating and this has been on the downward side. So if you look at it critically, you will know that there is no need paying subsidy again because the country needs the funds to develop other sectors of the economy.”
A professor of energy economics, Wumi Iledare, called for the revamp of Nigeria’s refineries as this would help boost local production of refined petroleum products and gradually halt subsidy on petrol.
“I support the decision that the refineries should be revamped and they can invite the private sector to buy shares in the plants,” he stated.
He noted that once Nigerian refineries became fully operational, subsidy spending on petrol would reduce considerably as local production of the commodity would increase.
Source: The Punch
