Minister of Finance, Ngozi Okonjo-Iweala
By Festus Akanbi
As the federal government expressed its readiness to resume the payment of subsidy to fuel marketers last week, the anticipated reduction in the landing cost of petrol due to the falling price of crude was yet to reflect in the pricing template of the Petroleum Products Pricing Regulatory Authority (PPRA).
In the meantime, the Coordinating Minister for Economy and Minister of finance, Dr. Ngozi Okonjo-Iweala, has put the savings for all the tiers of government from Subsidy Reinvestment and Empowerment Programme for the month of April at N36 billion, the same amount saved in the month of February .
The PPRA pricing template usually shows the difference between the cost of fuel importation and the pump price.
Crude prices continued to tumble last week as Brent fell went down to $90/bbl while Bonny Light, which formed the bulk of Nigeria’s crude, was sold at $97 at the international market. The Bonny Light was sold for $121.87 in February.
The July contract for benchmark US sweet, light crudes dropped $2.23 to $81.80/bbl June 20 on the New York Mercantile Exchange. The August contract fell $2.90 to $81.45/bbl.
Agency reports said US crude oil prices on Thursday fell to their lowest level since October, pressured by weak manufacturing data from China and the U.S., reminding market watchers that the global economy remains sluggish and ratcheting up fears it may slow further.
Industry watchers had maintained that as price of crude oil continues to tumble at the international market, the federal government would pay less in terms of subsidy, a postulation that gained ground earlier in the year especially when it dawned on everybody that the 2012 subsidy budget was running out fast.
Out of N888 billion earmarked for subsidy payment in the 2012 budget, the federal government had paid fuel marketers over N500billion as difference between the cost of fuel import and the N97 per litre sold at the local market nationwide although part of the money was used to settled claims meant for the last quarter of last year.
However, a glance at the pricing template of PPRA showed that the downward trend in prices of crude is yet to reflect in the expected open market price of petrol in Nigeria.
This is perhaps as a result of the fact that the agency was still using the pricing template for the month of April as at last week.
In the template, the landing cost of petrol plus margins is N169.13 per litre.
With this figure, it means the federal government is subsidising petrol at the rate of N72.37 per litre given the fact that the product is sold for N97 per litre to the people. As at December 31, 2011, before the partial withdrawal of subsidy, it stood at N76 per litre but was reduced to N44 per litre when the official price of petrol was pegged at N97 per litre.
However, unlike the trend in February where Rivers State emerged the greatest beneficiary of the subsidy savings in terms of size, Akwa Ibom State had the highest chunk of the savings for the month of April.
A breakdown of the savings on SURE-P by the finance minister last week showed that whereas total savings accruable to the federal government for the period under review was N16,292,783,505.15, savings for the 36 states of the federation amounted to N12,885,318,165.66 while N6,371,134,020.62 accrued to the 774 local government councils in the country to the programme.
A further breakdown of the figures showed that the share of the federal government was made up of N15 billion direct savings; the share accruable to derivation and ecology fund was put at N309, 278,350.52; the Federal Capital Territory - N309, 278,350.52; the stabilisation account - N154, 639,175.26; while savings allocated to the federal government’s share of development of natural resources amounted to N519, 587,628.87.
According to the breakdown, Akwa Ibom State got the highest allocation of N1,524,954,188.86 and was closely followed by River State wi th N1,376,057,865.56.
Delta came third in that order with N1, 273,231,752.18 and was followed by Bayelsa with N929, 506, .329.41.
The state with lowest allocation was Ebonyi, which got N184,346,679.91 while Ekiti, Nassarawa and Gombe states got N185,951,986.02; N190,390,397.30 and N197,216,823.42 respectively.
The federal government re-introduced the subsidy on petrol, with the government fixing the price of petrol at N97.00 per litre.
The savings accruing to the three tiers of government is the difference between the current official price of petrol of N97 per litre and the old official price of N65 per litre.
Unlike the case in the first quarter of the year, the price of crude oil has declined progressively, coming down to $90 per barrel last week against $123 per barrel in March.
The ministry of finance last week cleared fuel import subsidy payments that were held up while authorities verified they were for genuine deliveries, as part of efforts to combat fraud.
Okonjo-Iweala said last week she had ordered a “slow down” to fuel subsidy payments to allow checks to stop scams that have cost it billions of dollars.
Fuel shippers say they are facing delays at import terminals while their subsidy payments are scrutinised, and some private firms have halted deliveries, while others are relying on swaps for crude oil to receive payments.
The board of SURE-P, which is headed by a foremost diplomat and industrialist, Dr. Christopher Kolade, was in January inaugurated and has the mandate to ensure the effective and timely implementation of projects to be funded from the subsidy savings.
It was also charged with the responsibility of monitoring the fund in the petroleum subsidy savings account, as well as the programme to improve the quality of life of the Nigerian people.
Jonathan said the SURE-P is an initiative designed for the total deregulation of the downstream petroleum sector.