The high price of crude oil globally has led to an increase in the landing cost of Premium Motor Spirit (petrol) imported into Nigeria to a new high of N249.42 per litre.
However, the pump price of petrol in the country, is still at N162-N165 per litre since December despite the global increase in crude oil price, leading to increased cost of subsidy by the government through the Nigerian National Petroleum Corporation, which has been the sole importer of petrol into the country in recent years.
Despite the increase in subsidy, it is still not certain when the government will deregulate the price of petrol in the country.
In March this year, a pricing template was released by the Petroleum Products Pricing Regulatory Agency (PPRA), that indicated the guiding prices for the month.
According to the template, petrol pump price was expected to range from N209.61 to N212.61 per litre. However, this price range was received with widespread public condemnation and was later deleted by the agency from its website.
In Port Harcourt, Lagos and many other cities, the pump price of petrol has remained between N162 and N165 per litre at many filling stations.
The landing cost of petrol was N189.61 per litre on 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.
However, the Central Bank of Nigeria in May, adopted the NAFEX exchange rate of N410.25 per dollar as its official exchange rate, devaluing the naira.
Brent, the international oil benchmark, increased to $77.72 per barrel on July 30, as the price of crude oil has continued to rise in recent months. However, it dropped last Friday to close at $70.70 per barrel.
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.
NNPC said the daily consumption of petrol is about 60 million litres, with a subsidy of N110.34 per litre, daily subsidy increased to N6.62bn on July 30 from N6.07bn on June 25.
The cost of petrol quoted on Platts rose to $718 per metric tonne (N219.66 per litre) on June 25 from $691.25 per MT (N211.47 per litre) on June 16.
In its March template, the PPRA 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).