With the Nigerian National Petroleum Corporation, NNPC, set to work on a new pricing template with the Petroleum Product Pricing Regulatory Agency, PPRA, petrol may sell for less than the current official pump price of N87 per litre by the end of first quarter of 2016.
The Group General Manager, Corporate Planning and Strategy of the NNPC, Bello Rabiu, who made the disclosure on Friday in Abuja at a press briefing, said as at Thursday, the landing cost of one litre of imported petrol was N65. The logistics for bringing it to the depot and to the filling stations, he said, is about N10.55. The distribution cost is N15.49 bringing the total to N91.04 while in the open market, the product sells at N91.52/litre.
Breaking the analysis down further, Rabiu said: “Now, if you take away N87, which is regulated price, it means that subsidy is basically N4.85. If we are consuming 41 million litres, it means we are subsidizing N200 million a day”.
The GGM dropped the hint that the cost of petrol is now reducing naturally because the present importation cost of N65 was N71 about three years ago and with the review, a new template would indicate that there is no need for fuel subsidy in Nigeria.
In his analysis of how the Federal Government would reduce the cost of petrol importation, he said: “If we can look at this one that is N91.52 and we pray we can get about N15 off there, that will bring it down to a little more or less than N80. If we take off N10.50, we come down to N81. If we take it down to N7.52, we come down to N85.
“So you can see that the price we have today, if we look at the template can come down, and many Nigerians will believe that there is no subsidy.”
He added: “Looking at this cost of N91.52 per litre, you can see it is what has been in place since 2000 to 2002, which looks to have been over-inflated”.
Mr. Rabiu maintained that government is planning to optimize the cost of petrol for the benefit of the citizenry.
The Group General Manager said: “So, looking at the template itself, another thing we are doing is how we can optimise that one.
“As nature will have it, the market itself is reducing the cost because three years ago, this N65 cost of bringing to Lagos was actually about N71. Now it has come down to N65 and it will go down again.
“So, if we actually optimise that template and reduce the template, that will reduce the total cost of import and there will be no subsidy in the country”.
According to him, “the government has already seen the possibility of reducing the cost by an average of N10”.
But Rabiu disclosed that the new price to be arrived at by the PPPRA would be released before the end of first quarter next year.
The NNPC official confirmed that there was zero allocation for fuel subsidy in the 2016 budget plan because the new adjustment that will lower the cost of product importation will make subsidy unnecessary.
He also expressed confidence that the price of crude oil will not rise, at least not in the next 12 months as a result of resumption of production by Iran, which had been on suspension.
The GGM stressed that the adjusted template would be used subsequently to modulate prices down or up on a periodic basis if required, adding that if oil prices continue to fall and inefficiencies are eliminated within the template, there will surely be negative subsidy.
The negative subsidy, he said, shall be remitted to the Petroleum Support Fund in line with the current PPPRA guidelines.
“The savings under such a regime could be domiciled in the PSF as a buffer for future subsidy (if any) that may arise during high oil price regime or invested by the industry in supply and distribution efficiency improvement projects such as decongestion of Apapa area, Single Point Monitoring in Port Harcourt and Warri, complimentary rail services, inland waterways, etc”, Bello said.