Buoyed by the rise in global crude oil prices, the subsidy being incurred on petrol by the Nigerian government has risen to an estimated N10 billion daily, a BusinessDay analysis of industry data has shown.
The landing cost of petrol imported into the country was N309.87 per litre on February 25, using the official exchange rate of N416.46/$.
With daily petrol consumption put at about 60 million litres by the Nigerian National Petroleum Company and a subsidy of N168.87 per litre, the daily subsidy amounts to N10.1 billion as the pump price of the product remains steady at N162-N165 per litre.
“With rising oil prices, Nigeria’s current petrol subsidy is very enormous and his hitting Nigeria’s crude income very deeply,” Mike Osatuyi, national operations controller of the Independent Petroleum Marketers Association Nigeria (IPMAN), told BusinessDay.
The international oil benchmark, Brent crude, the gauge for Nigeria’s crude, jumped to $118 per barrel on Friday from $77.24 per barrel on December 31, 2021.
“The current market reality shows Nigeria pays about N17 billion daily on petrol subsidy,” Osatuyi said.
Cheta Nwanze, a partner at SBM Intelligence, an Africa-focused geopolitical firm, predicts Nigeria’s 2022 subsidy spend would be the highest on record, surpassing the former administration’s records.
“Nigeria is in a deeper financial hole than it has ever been, and the only thing the government has done is to dig even deeper,” he said.
An analysis of data collated by BusinessDay showed that without subsidy, petrol would be selling for about N333.099 per litre as of February 25.
Further analysis of the petroleum pricing template showed the cost of petrol quoted on Platts stood at $918.75 per metric tonne (N285.33 per litre, using the I&E rate of N416.33/$1) on February 25 2022 from $754.75 per MT on December 31, 2021, with a freight cost of $26.77 per MT (N8.31 per litre).
Other cost elements that make up the landing cost include lightering expenses (N4.81), Nigerian Ports Authority charge (N2.49), Nigerian Maritime Administration and Safety Agency charge (N0.23), jetty throughput charge (N1.61), storage charge (N2.58), and financing (N2.17).
The pump price is the sum of the landing cost, wholesaler margin (N4.03), admin charge (N1.23), transporters allowance (N3.89), bridging fund (N7.51), marine transport average (N0.15), and retailer margin (N6.19).
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“Before the end of 2022, Nigeria’s petrol subsidy will hit N6 trillion,” Kelvin Atafiri, who runs Cavazzani Human Capital Limited, an investment firm exposed to the oil and gas sector, said.
The NNPC said recently that it spent N210.38 billion on petrol subsidy in January 2022.
According to NNPC’s latest presentation at Federation Accounts Allocation Committee (FAAC) meeting, the shortfall included a December 2021 value of PMS shortfall of N176.48 billion plus the outstanding value shortfall recovery of N33.90 billion accrued over 2021.
The oil firm said it would deduct N242.5 billion (about N143.7 billion for January 2022 recovery and November spot arrears of N98.8 billion) during next month’s FAAC meeting.
Further checks showed that NNPC did not remit any money to the FAAC for onward distribution to the federating units.
Findings by BusinessDay showed FAAC allocation declined by 17 percent to N574.668 billion in January 2022.
“Subsidy payment is a gorilla that has swallowed Nigeria’s economy and has led to the collapse of education institutions, road infrastructures and health facilities,” said Wumi Iledare, a professor of economics and former president of Nigerian Association for Energy Economics.
