Deputy Transport Editor, Theodore Opera and Emery Correspondents, Udeme Akpan, Edin Ejoh and Mariam Eko Report from Lagos:
Nigeria’s downstream petroleum sector is on high alert as the Federal Government considers ending petrol subsidies due to rising import bills. The potential move could lead to increased pump prices, altered market dynamics, and supply chain disruptions, sparking uncertainty among industry players and consumers.
Industry insiders revealed to Vanguard that a potential increase in pump prices is imminent, enabling the Nigerian National Petroleum Company Limited (NNPCL) to generate sufficient funds to settle outstanding debts with international suppliers. This development may lead to a compromise pump price of N1,000 per liter or higher, considering the landing cost of approximately N1,200 per liter, excluding delivery costs to petrol stations.
Currently, NNPCL is facing challenges in meeting the nation’s demand due to inadequate supply, exacerbated by suppliers’ reluctance to provide credit. Additionally, a significant amount of products is being smuggled out of the country, further worsening the shortage.
According to transactional analysis obtained by Vanguard, the landing cost, including product cost, finance cost, freight, port charges, insurance, storage, and regulatory fees, amounts to N1,205.52 per liter. When transportation costs, marketers’ margins, and dues are added, the estimated official pump price rises to N1,405 per liter.
This indicates that even at a proposed N1,000 per liter, under-recovery (subsidy) would remain substantial, placing the government in a dilemma between full cost recovery (total subsidy elimination) or a compromise position of sharing the cost between the government and consumers at a N1,000 per liter pump price.
