The landing cost of Premium Motor Spirit (petrol) imported into the country has increased to a new high of N249.42 per litre on the back of high global crude oil prices even as federal government is also weighing possible ways to bring about the much expected full deregulation of the downstream sector.
The further rise in the landing cost of petrol means increased subsidy as the pump price of the product remains steady at N162-N165 per litre.
Petrol subsidy, which was removed in March 2020, resurfaced earlier this year as the government has left the pump price of the product unchanged since December despite the increase in global oil prices.
The Nigerian National Petroleum Corporation (NNPC) which has been the sole importer of petrol into the country in recent years, has been bearing the subsidy cost since it resurfaced.
While marketers have continued to stress the need to allow market forces determine the pump price of petrol and do away with subsidy, it remains uncertain whether the discussions between the Federal Government and labour unions will lead to the deregulation of petrol price.
An analysis of data showed that the landing cost of petrol rose to N249.42 per litre on July 30 from N240.17 per litre as of June 25.
The Petroleum Products Pricing Regulatory Agency had in March this year released a pricing template that indicated the guiding prices for the month.
The template, which showed that petrol pump price was expected to range from N209.61 to N212.61 per litre, was greeted with widespread public outcry and was later deleted by the agency from its website.
The pump price of petrol has remained at between N162 and N165 per litre at many filling stations in Lagos since December.
The template, which was based on an average oil price of $62.22 per barrel for February and an exchange rate of N403.80 to a dollar, showed that the landing cost of petrol was N189.61 per litre.
In May, the Central Bank of Nigeria devalued the naira as it adopted the NAFEX exchange rate of N410.25 per dollar as its official exchange rate, days after removing the N379/$ rate from its website.
The price of crude oil, which accounts for a large chunk of the final cost of petrol, has continued to rise in recent months, with Brent, the international oil benchmark, increased to $77.72 per barrel on July 30. It, however, closed at $70.70 per barrel last Friday.
Based on the PPPRA template and Platts data, the expected pump price of petrol rose to N272.34 per litre on July 30 from N263.09 per litre as of June 25.
The expected retail price of N272.34 per litre and the current pump price of N162 per litre indicate a subsidy of N110.34 per litre as of July 30, compared to N101.09 per litre on June 25.
With daily petrol consumption put at about 60 million litres by the NNPC and a subsidy of N110.34 per litre, daily subsidy increased to N6.62bn on July 30 from N6.07bn on June 25.
The rising price of crude oil pushed the cost of petrol quoted on Platts to $748.50 per metric tonne (N228.91 per litre) on June 25 from $691.25 per MT (N211.47 per litre) on June 16.
The rising price of crude oil pushed the cost of petrol quoted on Platts to $718 per metric tonne (N219.66 per litre) on June 25 from $691.25 per MT (N211.47 per litre) on June 16.
The PPPRA, in its March template, used an average cost of $561.96 per MT (N169.22 per litre) and an average freight rate of $21.63 per MT (N6.62 per litre).
Other cost elements that make up the landing cost include lightering expenses (N4.81), Nigerian Ports Authority charge (N2.49), Nigerian Maritime Administration and Safety Agency charge (N0.23), jetty throughput charge (N1.61), storage charge (N2.58), and financing (N2.17).
The pump price is the sum of the landing cost, wholesaler margin (N4.03), admin charge (N1.23), transporters allowance (N3.89), bridging fund (N7.51), marine transport average (N0.15), and retailer margin (N6.19).