The Nigeria National Petroleum Commission (NNPC) will be paying more subsidy on Premium Motor Spirit (petrol) as the landing or import cost of the product has increased to N249.42 per litre.
This is due to the recent increase in global oil prices and the depreciation of the naira against the dollar.
NNPC which is the sole importer of petrol into the country since January has been paying subsidy because of widespread public outcry against an increase in the pump price of petrol.
Despite the increase in the landing cost of petrol, the pump price have remained stable across the country at about N165 per litre.
Petrol subsidy, which was removed in March 2020, resurfaced earlier this year as the government has left the pump price of the product unchanged since December despite the increase in global oil prices.
Using the Petroleum Products Pricing Regulatory Agency (PPPRA) template, the landing cost of petrol rose to N249.42 per litre on July 30 from N240.17 per litre in June 25.
The agency had in March this year released a pricing template that indicated the guiding prices for the month.
The price of crude oil, which accounts for a large chunk of the final cost of petrol, has continued to rise in recent months, with Brent, the international oil benchmark, increased to $77.72 per barrel on July 30.
Also, the Central Bank of Nigeria devalued the naira as it adopted the NAFEX exchange rate of N410.25 per dollar as its official exchange rate.
Based on the PPPRA template and SP Platts data, the expected pump price of petrol rose to N272.34 per litre on July 30 from N263.09 per litre as of June 25.
This is an indication that NNPC could be paying more to subsidise petrol sold to marketers.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, had in July disclosed that the NNPC deducted N194.31 billion from oil revenue for the payment of fuel subsidy as of May this year.
Speaking at the presentation of the draft for the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper in Abuja, she said the government is planning to spend N900 billion on petrol subsidy in 2022.
Ahmed stated that the amount the government had been spending on subsidizing petrol could be redirected to more productive sectors of the economy such as health, education and infrastructure.
Ahmed said, “This is costing us big time. We are spending over N150 billion on subsidy. That means NNPC has to use that amount of money to pay for PMS and distributing it. That is money that the federation account can share.
“Imagine what we could have done with that amount. How many schools you can build, how many health centres. It is not wise; it is not wise because we are hurting our economy.”