FG Resumes Payment Of Petrol Subsidy

FG Resumes Payment Of Petrol Subsidy


The Federal Government has said it would pay subsidy on Premium Motor Spirit (PMS) from the recoveries made in the first quarter of 2016.

This was contained in the latest Petroleum Product Pricing Regulatory Agency (PPPRA) template released in Abuja yesterday.

It said between January and March, the federal government was able to save about N10 billion as a result of selling the product above the expected open market price.

According to the new template, the expected open market price of the PMS had risen to N99.38 per litre for independent and major oil marketers and N98.62 per litre for NNPC retail outlets.

It added that the expected open market price was the actual price of the product without subsidy and it was based on the current exchange rate of N197 to a dollar.

It further said, at the current price of N86 per litre at NNPC retail outlets, the federal government was paying N12.62 per litre as subsidy on the product and N12.88 per litre as subsidy for other oil marketers’ price of N86.50.

A breakdown of the template revealed that for NNPC retail outlets and independent and major oil marketers, the landing cost of PMS imported into the country was N84.32 and N85.08 per litre, respectively.

It stated that the distribution margin, which include retailers, transportation, bridging fund and dealers margin among others, stood at N14.30 for both the NNPC and other marketers.

According to the statement, this brings the current expected open market price to N98.62 and N99.38 for NNPC retail outlets and other marketers, respectively.

Prior to his election, President Muhammadu Buhari , had announced that he had nothing to do with subsidy.

This position was further reinforced by his administration when it announced last December that it was scrapping the Petroleum Support Fund, also known as fuel subsidy.

Speaking to journalists at the Port Harcourt refinery where he had spent Christmas inspecting the facility, the Minister of State for Petroleum, Ibe Kachikwu, said the government could no longer pay the subsidy due to the fraud tainting the scheme.

Kachikwu, who is also the Group Managing director of the Nigerian National Petroleum Corporation (NNPC), also added that government could no longer afford the payment due to the dip in its revenue, caused by the drop in crude oil prices.

He said a new pricing template he signed off effectively removed the payment of subsidy on petrol and that oil marketers would be informed of the development in the coming days.

“So for the first time, people will understand that the pricing modulation I was talking about is not a gimmick. It is for real. We have gone to find out how we will be able to fluctuate this market to reflect what the reality of the crude market is. The objective is that one, we cannot afford to continue to subsidise.

“We can’t even understand where those subsidies were going to. There are a lot of fraud elements in it so we need to cut that off.

“The second is the earning capacity of the Federal Government is deteriorating by the day with lower prices of crude and come out more,” he said.

The call for government to scrap the payment of subsidy on petrol has become louder recently following the drop in crude oil prices.

A leader of the ruling All Progressives Congress and former Governor of Lagos, Bola Tinubu, had joined the call for the government to scrap the subsidy regime.

Tinubu, who had opposed the removal of the subsidy under the administration of former President Goodluck Jonathan, said subsidy was originally a good idea, but it had since been “perverted”.

“In a perfect world, I wish we could sanitise the subsidy regime and thus continue (with) it. However, I have reached the conclusion that there are too many demons in the system for this hell to be converted into good earth let alone heaven,” he said, while speaking at the 10th memorial anniversary of left-wing politician and scholar, Bala Usman, in Kaduna.

“I would choose to remove the subsidy and use the money to help people – let us feed our school children, with our local produce promote agriculture, create jobs and start erecting a social safety net for the vulnerable among us in true need,” he added.

Also, at the end of its Central Working Committee meeting in Abuja, the NLC said the discordant pronouncements from government officials on plans to cut subsidy was creating panic and confusion in the system, even as it reaffirmed its opposition to any fuel price increase.

An attempt by the government to cut fuel subsidy in 2012 led to what came to be known as the #OccupyNigeria protest.

Nigerians were outraged when in the early hours of January 1, 2012, then President Jonathan announced the removal of subsidy from petroleum products.

Expectedly, that announcement immediately drew Nigerians to the streets, sparking spontaneous protests across the country.

But it soon became clear that the subsidy regime was characterised by monumental fraud.

For instance, to benefit from the 2011 fuel subsidy largesse, some oil companies “manufactured” fictional oil ships (vessels) they claimed traversed seas and oceans of the world carrying imaginary petrol, with Nigeria the final destination of the product, a Technical Committee set up by the federal government discovered.

For supplying this phantom product to Nigeria, some seven companies pocketed a princely N13 billion naira from the 2011 fuel subsidy payments, the committee’s report, at the time, showed.

Some other companies, not wanting to create fictional vessels, decided to space-travel existing ones; such that real vessels, which were definitely in countries like China and UAE, were purported to have discharged petrol into storage depots in Nigeria at the exact time they were in those other countries. The 11 companies involved in this category of fraud pocketed N21 billion from the 2011 subsidy payments, the report said.

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