Nigeria: Govt pays marketers N40.27/l as subsidy for kerosene

*Kerosene queue at an NNPC filling station.

*Kerosene queue at an NNPC filling station.

Ike Amos

31 December 2015, Sweetcrude, Abuja – The Federal Government has kept mum on its plans for Kerosene in the year 2016, as subsidy for the commodity rises to N40.27 per litre.

This was in spite of the Federal Government’s clear cut policy for Premium Motor Spirit. Specifically, the government is subtly contemplating removing subsidy on PMS, starting with its price modulation, starting January 1, 2015, with a

The official price for kerosene is N50 per litre, while the expected open market price for the commodity is N90.27 per litre. To this end, the Federal Government is currently paying N40.27 per litre as subsidy for the product.

Giving a breakdown of the cost elements per litre of Kerosene, the Petroleum Products Pricing Regulatory Agency (PPPRA) in its Pricing Template for Household Kerosene (HHK), put the Cost plus Freight (C+F) at N63.99 per litre; Lightering Expenses was put at N4.18; Nigerian Port Authority (NPA) charges was put at N0.84, while financing was N0.37.

Others are Jetty Throughput Charge N0.80; Storage charge N3.00, bringing the Landing Cost to N74.78 per litre.
Furthermore, Retailers margin was put at N4.60; Transporters and dealers margin stood at N2.99 and N1.75 per litre respectively, while bridging fund, Marine Transport Average (MTA) and Admin Charge stood at N5.85, N0.15 and N0.15 per litre respectively.

Consequently, the PPPRA puts Expected Open Market Price (OMP), which is Landing cost plus Margins at N90.27, official ex-depot price at N34.51 per litre, retail price at N50 and subsidy for the commodity at N40.27per litre.

The PPPRA had a few days ago, stated that that effective January 1, 2016, Premium Motor Spirit, otherwise known as petrol, would be sold at N86 per litre by the Nigerian National Petroleum Corporation, NNPC Retail Stations, while other oil marketers would sell at N86.50 per litre.

The PPPRA had stated that the reduction in the price of the commodity was due to an implementation of the revised components of the Petroleum Products Pricing Template for PMS and Household Kerosene.

According to the PPPRA, the revised template, which would be reviewed on quarterly basis is geared towards ensuring an efficient and market-driven price that would reflect current realities.

It explained that since 2007, crude oil price had been moving up and down, while the template remains the same, adding that this had made it necessary for it to introduce a mechanism whereby the template would be sensitive to the price of crude oil.

The PPPRA said the NNPC would sell lower than other oil marketers, due to the fact that it is cheaper for it to import, compared to the independent and major Oil marketers.

It listed the major components affected by the review in the pricing template to include: Traders Margin, Lightering Expenses, Nigerian Port Authority (NPA) Charges, Jetty Throughput and Storage Charges, as well as Bridging Fund. Other components include: Retailers, Transports and Dealer margins.

Giving a breakdown of the revised template, Ahmed disclosed that Trader’s margin, which is the amount paid to traders for bringing the commodity into Nigeria, has been eliminated, from N1.47 per litre previously; Lightering Expenses reduced from N4.07 per litre to N2 per litre; NPA, reduced from N0.77 to N0.36 per litre; while Jetty Throughput and Storage charges were reduced from N0.80 and N3, to N0.40 and N1.50 per litre respectively.

On the other hand, Retailers margin was increased to N5 per litre from N4.60; Transporters rose to N3.05 from N2.99; dealers margin was reviewed upward to N1.95 from N1.75, while bridging fund dropped to N4 per litre from N5.85.

To this end, the PPPRA put the new Ex-depot price of PMS at N77 per litre, compared to N77.66 per litre; open market price would be N86.29 for oil marketers and N85.93 per litre for the NNPC, while the pump price for oil marketers would be N86.50 per litre and NNPC, N86 per litre.

About the Author