Nigeria: Rising oil prices will test govt’s ability to pay increasing petrol subsidy

04 May 2016, Houston, Texas — Recent increases in the global prices of crude oil to an average of $45 per barrel could become some sort of test on Nigeria’s ability to cover for the differential in the open market price of imported refined petrol and the regulated domestic pump prices of the product.

*Fuel dispenser.

*Fuel dispenser.

According to industry experts, based on the revised pricing template for petrol which the Petroleum Products Pricing Regulatory Agency (PPPRA) released recently and in which subsidy on petrol has increased to over N12 per litre that the government would have to find a way to cope with the payments if the conditions remained constant for more than five months.

Based on PPPRA’s template, the government now pays to oil marketers N12.88 and N12.62 for every litre of petrol brought into the country.

The subsidy payment is the differentials in the current expected open market prices of N99.38 and N98.62 per litre, and government regulated pump prices of N86 and N86.50 per litre for respective importations of the Nigerian National Petroleum Corporation (NNPC) and independent oil marketers.

But at a 45 million daily national petrol consumption rate, the government will be paying an average of N579.6 million every day to oil marketers (N12.88 multiplied by 45 million).

 

 

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