Petroleum Landing cost hits N249/litre

The cost of petroleum imported into the country has increased to about N249.42 per litre on the back of global crude oil prices.

The rise in the 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 in the early months this year as the government had 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 petroleum into the country in recent years, has been bearing the subsidy cost since it resurfaced. Marketers have continued to stress the need to allow market forces to 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 reduction of petrol price.

An analysis of data collated as of Sunday showed that the landing cost of petrol increased 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 2021 released a pricing template that indicated the guiding prices for the month.

The templates, which showed that petrol pump price was expected to range from N209.61 to N212.61 per litre, was introduced with a widespread public outcry and was later deleted by the agency from its website.

The price of petroleum has remained between N162 and N165 per litre at many filling stations in Lagos since December.

The template was based on an average oil price of about $62.22 per barrel for February and at an exchange rate of N403.80 to a dollar, showed that the landing cost of petroleum was N189.61 per litre.

In May, the Central Bank of Nigeria(CBN) 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 petroleum has continued to rise in the recent months, with Brent, the international oil benchmark, increased to $77.72 per barrel on July 30. It has however been, 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 litrN272.on the 25^th of June.

The normalized 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 30^th of July, compared to N101.09 per litre on the 25^th of June

With the daily consumption of petroleum 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 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 PPPRA, in its March template, used an average cost of $561.96 per MT (N169.22 per litre) and an average rate of $21.63 per MT (N6.62 per litre).

Other 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).