Petrol subsidy could rise to N3 trillion annually under current market realities – PPMC

Petrol subsidy could rise to N3 trillion annually under current market realities – PPMC

The Petroleum Products Marketing Company (PPMC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC) has warned that the annual subsidy on Premium Motor Spirit (petrol) could rise to N3 trillion if the current market realities persist.

The Managing Director, PPMC, Mr Isiyaku Abdullahi, said this at a panel session during the 15th OTL Africa Downstream Week 2021 in Lagos, according to NAN.

The sharp rise in global oil prices to record highs had pushed the subsidy cost being incurred by the Federal Government to N8.28 billion daily.

Abdullahi said, “At $80 crude oil, 60 million litres daily consumption and N411/$1 forex, PMS under-recovery per litre will be N138/litre. Daily PMS under-recovery will be N8.3 billion. Annual PMS under-recovery will escalate to N3trillion.”

Abdullahi added that with the rehabilitation of the country’s refineries and the construction of condensate refineries as well as the Dangote refinery, the Nigerian fuel market would transform from import-dependent to a net exporter by 2024.

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He said full deregulation of the downstream sector might push an accelerated switching to Compressed Natural Gas and Liquefied Petroleum Gas, subject to global energy prices trend in the near term.

According to him, the Petroleum Industry Act presents a unique opportunity for investments across the value chain.

The Executive Secretary/Chief Executive Officer, Major Oil Marketers Association of Nigeria, Mr Clement Isong, explained that if the Nigerian downstream sector is headed for major changes, the regulator must strive to provide a level playing field, guard against the negative effect of a monopoly and encourage inflows from private sector investments.

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He said, “The implementation of the PIA is now more critical than the law itself. Petroleum products pricing needs to be right. Eliminate pricing distortions and create a competitive market for the sale and distribution of petroleum products and natural gas.

“Price competition will over time lead to innovation which should reduce logistics and distribution costs. The pricing strategy needs to take into consideration freight, landing costs, jetty throughput charges, storage costs, etc.”

What you should know

The subsidy, which the NNPC prefers to call ‘value shortfall’ or ‘under-recovery’, resurfaced in January this year as the government left the pump price of petrol unchanged at N162-N165 per litre despite the increase in oil prices.

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The Federal Government had in March 2020 removed petrol subsidy after reducing the pump price of the product to N125 per litre from N145 following the crash in oil prices.

The NNPC, which has been the sole importer of petrol into the country in recent years, has been bearing the subsidy cost since it resurfaced.


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