Eight months after the removal of subsidy on petroleum products, and introduction of a “price modulation” of fuel prices, the federal government through the Nigerian National Petroleum Corporation (NNPC) has reintroduced the subsidy.
Crude oil prices were trading around $41 dollars a barrel when pump prices were increased from N97 naira to N145 naira in May 2016. Crude oil currently trades at $55 dollars a barrel. Foreign exchange rates on which the current price regime was based have depreciated from N285/$1 to N305/%$1. Parallel market exchange rates currently hover close to N500/$1.
Investigations by Nairametrics reveal that, the NNPC is currently importing over 90% of petroleum products, while major marketers buy from it at N131 naira per litre. The landing cost of petrol is currently N145 naira per litre. A N23 naira increase over the N122 naira per litre landing cost when subsidy was removed.
The Petroleum Products Pricing Regulatory Agency (PPPRA) has refused to post a price template reflecting crude oil prices on its website. Unlike the previous subsidy regime, where government made payments to marketers, the NNPC is indirectly paying the subsidy by selling at a loss. The NNPC has refused to issue a formal statement on the reinstatement of subsidy or otherwise. The monthly NNPC report for November 2016, showed the corporation making a loss of over N121 billion naira.