With a new month beginning Tuesday, the pump price for petrol for September could be set at around N157.55 per litre using the pricing template designed by the petroleum products pricing regulatory agency, PPPRA and adopting an FX rate of N387.
As government revenues collapsed, the Minister of state for petroleum Timipre Silva had assured that the government will no longer subsidize petroleum products as had been the case for decades.
The price which is set for PMS at the petrol stations will be the real test of whether the government is firm about its desire to quit the wasteful subsidy regime. From tomorrow, any PMS price significantly below N157 per litre will mean that subsidy has not gone away and the government will then be required to explain who is funding this subsidy if that becomes the case.
At the beginning of August, the sole importer of petroleum products, PPMC set an ex-depot price of N138.62 per litre for PMS and after adding their margins, marketers and retailers have been selling at between N145 per litre for NNPC gas stations and N150 at most other stations.
According to the PPPRA template which uses the average Platts FOB Rotterdam including freight as basis, coastal price for September should be N121.68. Then you have to add a plethora of other endless charges many of which do not make sense to the ordinary eye.
For the very first time, BusinessDay reporters have now gone behind the scene to unveil for readers the mindboggling and sometimes inexplicable levies maintained by various groups including government agencies and which have been encouraged by decades of an opaque subsidy regime.
The charges per litre include insurance cost of N0.17, lightering expenses of N4.57, NPA of N2.38, NIMASA of N0.23, Jetty throughput of N1.61, Storage charge of N2.58, Finance cost of N1.33, maritime transport average N0.15; PEF(equalization) N7.51; PPPRA admin charge N1.23; National transporters allowance N3.89; wholesale margin N4.03 and retailers margin N6.19.
It would seem that the government is hoping that prices could be kept around the N145 a litre price which is considered as a watershed.
Using average Platts for July and adding on the template established charges, the pump price for petrol in August should have been around N154 a litre so there was already an element of subsidy.
However, because the PPPRA deliberately dodged its role of setting price for August, it is not clear as yet who is paying for this subsidy given that the PPMC set an ex-depot price of N138.62 for the current month.
