President Muhammadu Buhari,Military Spending
Muhammadu Buhari, President, Federal Republic of Nigeria

The Federal Government may be caught between the proverbial devil and deep blue sea as the landing price of petrol is currently N171 per litre. Nigerian National Petroleum Corporation (NNPC) Group Managing Director (GMD) Mikanti Baru indirectly confirmed this when that the landing price for petrol had hit N171 per litre, N26 higher than the current price of N145 per litre. Baru also stated that the current pump price would be maintained, but was silent on who was paying for the differential.

The landing price is the cost at which petrol gets to the country, and excludes profit margins for the marketers. The entire nation has been caught up in a severe fuel scarcity that has seen commercial activities ground to a halt.

What this means ?

The current landing prices about major oil marketers in the country, will be unwilling to bring in petrol cargoes into the country. The NNPC is thus currently the sole importer of petrol in the country. A previous subsidy system whereby the government paid the cost differential to the marketers was scrapped by the current administration, due to widespread fraud.

Implications of this

The NNPC by selling below cost price is running at a loss. This negates the earlier expressed intentions of the government to run the corporation profitably.

Why the reluctance to increase fuel prices

The government may be unwilling to increase pump prices having carried out a massive increase in 2015 from N87 a litre to N145 per litre. Approaching elections, mean a price increase could affect the ruling party’s performance at the polls.

A missed opportunity

Rather than implement what it then called a price modulation, the NNPC opted to leave pump prices unchanged even when global crude oil prices were on the rise. Had the government scrapped the subsidy regime totally, or activated the pump price modulation, the nation would not have been caught in a fix.

Onome Ohwovoriole has a degree in Economics and Statistics from the University of Benin and prior to joining Nairametrics in December 2016 as Lead Analyst had stints in Publishing, Automobile Services, Entertainment and Leadership Training. He covers companies in the Nigerian corporate space, especially those listed on the Nigerian Stock Exchange (NSE). He also has a keen interest in new frontiers like Cryptocurrencies and Fintech. In his spare time, he loves to read books on finance, fiction as well as keep up with happenings in the world of international diplomacy. You can contact him via onome.ohwovoriole@nairametrics.com

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