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Petrol subsidy rises to N3.64 per litre

January 27, 2015

A week after the Federal Government announced the reduction of the pump price of petrol, subsidy on the product has increased to N3.64 from the N2.84 stated on January 16, 2015, statistics obtained from the Petroleum Products Pricing Regulatory Agency have shown.

The PPPRA, whose website is now wearing a new look after going off for four days, has changed the format of the pricing template, with little details given when our correspondent checked on Monday. Before the change, the agency used a template that gave more details, including the cost and freight component of the product, and distribution margins, among others.

According to the latest petrol pricing template, the Expected Open Market Price of Premium Motor Spirit, otherwise called petrol, is N90.64 per litre as of January 23, up from N89.8 on January 16.

This means that N3.64 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.

The landing cost was put at N75.15 per litre, up from N74.35 recorded on January 16. The agency, however, did not disclose what led to the increase in the landing cost.

The landing cost is the sum of the product cost, freight fees, trader’s margin, lightering expenses, Nigerian Ports Authority fees, financing cost, jetty depot thoughput charge, and storage charge. But none of these was stated in the new template.

The addition of the distribution margins to the landing cost gives the total cost (EOMP). The distribution margins, which comprise retailers, transporters and dealers’ profits, as well as bridging fund, marine transport average and admin charges, were also not stated.

The Federal Government had on Sunday, 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.

The Director, Emerald Energy Institute, University of Port Harcourt and Professor Emeritus, LSU Center for Energy Studies, USA, Wumi Iledare, in an emailed response to questions from our correspondent, said, “The basis for N87 per litre price seems to me a political expediency decision rather than economics. Certainly, politics often trumps economic analysis.

“If I were advising the government, I would have used this opportunity to recommend a complete removal of subsidy immediately and allow export parity pricing mechanism to stand.”

Source: FEMI ASU, Punch

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