Brent, the international benchmark against which Nigeria’s oil is priced, appreciated on Thursday to $67.86 per barrel, as it increased by $0.66 when compared with the previous day’s price.
Industry data put the cost of the commodity at $67.86 per barrel as of 10.50am Standard Eastern Time, a development that showed further positive movements in global crude prices.
This came as figures obtained from the PPPRA showed that the Nigerian National Petroleum Corporation was currently spending an average of N47.5 as subsidy on every litre of PMS.
Latest data from the PPPRA’s PMS pricing templates for December 12, 16, 17, 18, 19 and 23 put the expected open market prices of petrol per litre at N172.92, N177.33, N177.32, N174.81, N177.92 and N180.78 respectively.
But the ex-depot price for collection of petrol, as captured in the templates, remained at N133.28 per litre, indicating that the NNPC subsidised the commodity by an average of N47.5 per litre during the review period.
The NNPC has been the sole importer of petrol into Nigeria for more than two years, after oil marketers stopped importing the commodity due to crude price fluctuations and the halt in the payment of subsidy to oil dealers by the Federal Government.
Industry operators stated that the appreciation in crude oil prices would always lead to an increase in the amount spent as subsidy on petrol by the NNPC.
They noted that steps taken by the Organisation of Petroleum Exporting Countries had been impacting positively on the cost of crude oil in the international market, adding that the rise in price might be sustained till year end.
The Central Bank of Nigeria, in its economic report for November 2019, for instance, confirmed the appreciation in crude oil price.
It stated that the average spot price of Nigeria’s reference crude oil, the Bonny Light (37° API) at end-November 2019, was $66.11/b, compared with $61.10/b recorded in October 2019, representing an increase of 8.2 per cent, relative to the level in the preceding month.
The bank also confirmed that the rise in crude oil price was due largely to the news of anticipated production cut by the OPEC+ and the adoption of a more stringent export control system for Nigeria and Iraq.
The National Operations Controller, Independent Petroleum Marketers Association of Nigeria, Mr Mike Osatuyi, told one of our correspondents on Thursday that the rise in oil price meant that petrol subsidy would increase.
He said, “Even if the price of oil increases to $90, as long as the pump price of petrol remains at N145 per litre, the government must continue to subsidise the product.
“We are waiting for government policy; whatever government decides, we are going to comply because we need to move forward. With Dangote refinery coming on stream, we should expect some radical policy changes in the oil industry, especially in the downstream sector.”
Marketers under the aegis of the Major Oil Marketers Association of Nigeria have described the subsidy on petrol as a drag on the downstream sector of the nation’s oil and gas industry.
“We are consistent in our view that the subsidy payment or subsidy in the petroleum downstream sector degrades operational efficiency and economics of the downstream sector. We don’t think it is good for the industry as a whole,” the Chief Executive Officer and Executive Secretary, MOMAN, Mr Clement Isong, said recently.
He reiterated the need for full deregulation, saying, “We think it is only deregulation that can help us clean up the industry and bring back efficiency.”
The International Monetary Fund, in its Regional Economic Outlook published in October, said Nigeria needed to reduce fuel subsidy to bring about more productive government spending.
“Fuel subsidies tend to be poorly targeted, foster over-consumption, curtail investment and maintenance in related sectors, and crowd out more productive government spending. Some countries need to take the opportunity afforded by low oil prices to reduce fuel subsidies to free up additional fiscal space (Cameroon, Nigeria, Senegal), as was done in Mozambique and South Sudan and is being pursued by Burkina Faso,” it said.
The Federal Government had on May 11, 2016 announced a new petrol price band of N135 to N145 per litre, a move that signalled the end to fuel subsidy payment to private marketers.
But the government later resorted to subsidy regime following the increase in the landing cost of petrol on the back of rising crude oil prices.
