The Federal Government through the Minister of Petroleum announced the reduction of fuel price to N87 beginning Monday. Before now, the PPPRA pricing template as at December 29, 2014 suggested subsidy payment of 90 kobo per litre but the price of crude has crashed to under $50 since then putting pressure on the government to reduce the price of fuel.
Now that the price of fuel has been reduced, the argument has now moved towards how the price was arrived and if the cut was deep enough. Some even suggest the government was in fact ballooning subsidy payments at a time when it could have wiped it out. But how much subsidy are we paying now? A premium times articles broke it down as follows;
The Executive Secretary of PPPRA, Farouk Ahmed, said on Monday that based on the landing cost of N74.35 per litre of PMS as at the close of business on Friday, January 16, 2014, the addition of distribution margin of N15.49 per litre would translate to an open market price, or pump price of N89.84 per litre. The price, according to Mr. Ahmed, is more by N2.84 than the N87 per litre approved by the Federal Government and announced by the Minister of Petroleum Resources, Diezani Alison-Madueke, on Sunday.
So, by implication this is the break down;
Landing Cost 74.35
Distribution Margin 15.49
Less Pump Price 87.00
Fuel Subsidy 2.84
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