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Home Business News Politics

Why fuel subsidy jumped to N1.4billion a day

Nairametrics by Nairametrics
March 1, 2015
in Politics
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Filing station and fuel queues

The latest data (27/2/2015) from the website of the Petroleum Product Pricing Regulatory Authority (PPPRA) reveals the difference between the official pump price of petrol of N87 and the expected open market cost of N123.66 is not a whopping N36.66. Back in February 18 when we last checked, subsidy was N15.82 and N14.16 as at December 29, 2014. The current subsidy of N36.66 is therefore more than twice the previous price of N15.82.

The reason for this increase is most likely the continued  depreciation of the naira in response to CBN’s money tightening moves as well as the rise in the price of Oil. The last time we checked (Feb 18), the PPPRA had an exchange rate benchmark price of N171.36 on its website as against N198 (Feb 27).

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This price depreciation has affected the cost of importing the product with the ‘C+F’ price element of the template jumping to N96.54 from N85 per litre as at December 29, 2014. Another cost element ‘Financing (SVH)’ also jumped to N1.41 from N0.42 per litre. Total landing cost excluding distributor margins is now N108.18 compared to N95.67 per litre as at December 29, 2014.

Brent crude on the other hand, has also risen from $48.04 per barrel in January 2015 to about $60.43 at the close of trade February 28, 2015. Brent crude was about $57 back in December 29, 2015.

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The jump in fuel subsidy is perhaps contributing to the resurgence of fuel queues around the country as the government struggles to find money to pay for importers.

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