There are indications that the price of Premium Motor Spirit (PMS) may hit N320 per litre later this month as the Federal Government has concluded plans to remove subsidy on the product as part of the ongoing implementation of the Petroleum Industry Act (PIA).
The Guardian gathered that the skyrocketing oil price, expected to hit $100 per barrel before the end of this year, will also push prices of petroleum products to a record high and worsen the spike in price of Liquefied Petroleum Gas (LPG). The Nigerian National Petroleum Corporation (NNPC) had last week disclosed that it spent a total of N905.27 Billion on petrol subsidy in eight months amid rising global oil prices.
With the international oil benchmark, Brent crude, at $82.39 per barrel yesterday, the landing cost of imported petrol is expected to increase, jacking up pump price of petrol. The price of diesel has already skyrocketed to N350 per litre, an indication that may further worsen plight of local manufacturers and businesses, which largely rely on the product for power generation in the face of erratic power supply in the country.
Amid plan to increase electricity tariff as part of the implementation of the Multi-Year Tariff Order (MYTO), most stakeholders, who spoke with The Guardian, yesterday, feared increase in prices of goods and services, high inflation, foreign exchange challenges as well as poverty surge. While President Muhammadu Buhari presented a borrowing dependent budget of N16.39 Trillion to the joint session of the National Assembly last week, the current global energy crisis would have been a bumper harvest for oil and gas dependent countries like Nigeria, as current price increase already created a windfall of over $1 Trillion revenue for international oil companies, but the lack of local refining capacity meant that import of products (aviation fuel, PMS, diesel, LPG and others) would erode projected gains.
While over N1.2 Trillion has reportedly been expended on petrol subsidy alone since the Federal Government brought back the scheme through the back door despite no budgetary allocation in the 2021 budget, the current move to remove the opaque scheme may provide more money for budget implementation, but may worsen consumers’ plight. 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 sharp drop in crude 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.
Across key global economies, energy crisis has worsened the economic devastation caused by COVID-19, as worst hit countries like China and others in Europe prepare for a cascading situation ahead of winter. Although, renewable energy has been on rise, most analysts have expressed pessimistic view whether the emerging option could enable consumers evade spiking bills.
Crude oil, which sold for less than $30 a few months ago, is trading for about $83 per barrel (brent), U.S. crude selling for about $79, trailing Nigerian crude that is exchanging for $82. At about $83 Dollars per barrel, the landing cost of petrol in Nigeria hovers around N290 per litre. Additional charges, including margins for retailers and wholesalers, transporters and equalisation standing at around N60 per litre would push the current pump price to about N350 should subsidy be removed.
While the Federal Government had last year increased electricity bills, there was a further slight adjustment to the tariff in September in the face poor supply. Unknown to most Nigerians, they are now paying higher for electricity after the authorities quietly raised the tariff without notifying consumers of the product. The two per cent tariff adjustment confirms plans by government to withdraw its subsidy payment in the sector, which is well over N30 Billion monthly.