‘FG should go beyond removing subsidy to full price liberalisation’
Against the backdrop of Federal Government’s claim that the downstream sector has been deregulated, some operators disagree and are calling for full price liberalisation.
Adetunji Oyebanji, managing director and CEO of 11 Plc in an interview with CNBC on Tuesday said that the retail price of gasoline when compared to the template issued by the Petroleum Products Pricing Regulatory Agency (PPPRA) using the official exchange rate and Platts oil price for the month of August, “you will find that prices at the pump should be significantly higher than they are right now.”
“We suspect that there may be some issues with how margins are being applied to various operators and the various sub headings within the template. So we continue to work with government to try and get clarification on this subject, but it is very clear that there is still an element of subsidy.
The Federal Government has often said that it wants to protect consumers against being exploited by marketers, but Oyebanji clarified that in the immediate, margins are more important than looking at the bottomline of operators.
“We have continued to engage the relevant agencies of government particularly the PPPRA in terms of getting an increase and improvement in the margins that we have, which have been stuck in 2008, and they were not touched again in another 8 years. We are trying to get an improvement of that because that would directly impact our bottomlines,” he said.
Oil marketers have severally called for the complete removal of subsidy and in March this year, the Federal Government announced a removal of subsidy on petrol, but said it would continue to announce prices.
Since August, it has been
www.businessday.ng unable to issue prices because a mild recovery of oil prices when plotted against a depreciating naira translates to higher pump price of petrol. The PPPRA is unwilling to announce higher prices but the NNPC could be quietly paying fresh subsidies.
At the dollar exchange rate of N385, petrol should be selling at N155 but it sells at N145, meaning an effective daily subsidy of N560 million calculated by an assumed under-recovery of N10 for each of the 56 million litres of petrol sold in Nigeria every day. At the dollar rate of N470 the subsidy is higher at N1.624 billion daily. This is derived from the assumed market price of N174 a litre and a N29 per litre subsidy if importers were to secure their FX on the parallel market.
In its operations and financial report for June, the state-owned oil firm reported N5.35 billion as payment for under recovery stirring controversy that it has begun paying subsidies again.