In lieu of the fall in global oil prices, the Federal Government may reduce the petrol pump price.
This is because the landing cost of Premium Motor Spirit, commonly known as petrol, has dropped to N82.57 per litre as of Thursday, December 18, from N127.57 on November 3.
According to data obtained from the Petroleum Products Pricing Regulatory Agency, the government’s spending on petrol subsidy has, fallen to a five-year low of N1.06 per litre as of that, compared to N44.94 on November 3.
As of November 3, the retail price of petrol was N141.94 per litre, according to the PPPRA, but as of December 18, the Expected Open Market Price (retail price) of petrol is N98.06 per litre.
Subsidy is the difference between this figure and the actual Petrol pump price which is N97.
There have been calls in some quarters on the government to reduce the pump price of refined petroleum products as the price of crude oil, which constitutes a major component in the pricing template, has plunged by more than 45 per cent.
Global benchmark Brent crude has lost almost half of its value since its mid-June spike of $115 per barrel, hovering around $61 on Sunday. It recently fell below $60 before rebounding last week.
An executive in the Nigerian National Petroleum Corporation (NNPC) hinted to News Agency of Nigeria why they hadn’t reduced the pump price of petrol in the country.
The executive explained, ‘Reduction of the pump price of petrol doesn’t happen like that because we don’t know how long this fall in oil prices will be. We had the same situation in late 2008 and early 2009. Oil price fell and we had over-recovery (a situation whereby the total cost is lower than the regulated price).
‘So, the government went ahead to reduce the pump price of petrol to N65 from N70. The following day, we started having subsidy again because the oil price started increasing. By April of that year, the price had reached N140. So, the market is such that we don’t know what can happen next.’
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