The Federal Government has officially put an end to the subsidy on premium motor spirit, popularly known as petrol. Although, the recent Petroleum Products Pricing template, issued by the Petroleum Products Pricing Regulatory Agency (PPPRA) does not contain the usual subsidy component.
The PPPRA is the government agency that regulates the prices of petroleum products in the country and its template has always offered insights into how the pricing of these products are determined by the regulators.
As of December 28, 2015, the official pricing template for petrol by the PPPRA showed that the Federal Government subsidised the product by N6.45 per litre. The Expected Open Market Price at that time was N93.45, which was N6.45 higher than the then retail price of N87 per litre.
On the revised template, the Estimated Open Market Price set by the regulator is now N84.78 for NNPC fuel stations and N85.1 for stations run by other oil marketer companies.
On the extra amount paid by consumers for the commodity, the Group General Manager, Corporate Planning and Strategy (NNPC), Mr. Bello Rabiu, while explaining the template, said:
The savings under such a regime could be domiciled in the PSF as a buffer to fund future subsidy (if any) that may arise during high oil price regime or invested by the industry in supply and distribution efficiency improvement projects such as decongestion of Apapa area, Single Point Monitoring in Port Harcourt and Warri, complimentary rail services, inland waterways, etc.
The PPPRA, after getting approval from the Federal Government, had announced last Tuesday that retail filling stations belonging to the NNPC would from Friday, January 1, 2016 sell petrol at N86 per litre, while other oil marketers would sell the commodity at N86.5 per litre.
The Executive Secretary, PPPRA, Mr. Farouk Ahmed, while announcing the new price of PMS in Abuja, had told journalists on Tuesday that the reduction in the price of the commodity was due to the implementation of the revised components of the petroleum products pricing template for PMS and House Hold Kerosene.
Since 2007, while crude oil price had been moving up and down, the template has remained the same. This made it necessary for us to introduce a mechanism whereby the template would be sensitive to the price of crude oil.
However, the template is not static, as there would be a quarterly review and if there is any major shift, the Minister of State for Petroleum Resources would be expected to call for a review, either upwards or downwards. If there is no major shift, the price would continue from January to March 2016. In addition, there would be a Product Pricing Advisory Committee that would be set up to advice the PPPRA concerning movements in the price of crude oil.
On why the NNPC sold at a lower price than other oil marketers, Ahmed explained that it was due to the fact that it was cheaper for the corporation to import products, compared to the independent and major oil marketers.