The federal government has earned about N2.6 billion as refund from the Nigerian National Petroleum Corporation (NNPC) and other petroleum marketers, as the difference between the landing cost of importing petrol and the government approved pump price.
The refunds are as a result of the low price of oil which has made marketers sell petrol above the cost of importing it.
That differential and refund are now made possible because of the introduction of the fuel price modulation mechanism in the country.
The out-going Executive Secretary, Petroleum Products Pricing Regulatory Agency (PPPRA), Farouk Ahmed, said in Abuja on Thursday at the formal handing over of the management of the agency to his successor, that as at February 16, 2016 the NNPC and other fuel marketers were refunding to the government an average of N13.81 per litre.
The refund was based on the fuel cargoes that arrived the country in December 2015. The PPPRA said it has already communicated to the appropriate authorities about the price over-recovery regime.
Mr. Ahmed was one of the Chief Executives of regulatory agencies in the oil and gas industry removed from office by President Muhammadu Buhari on Monday.
With crude oil prices facing significant decline since the middle of 2015, the fuel pricing regulatory agency was compelled in January 2016 to reduce the retail price of petrol from the official price of N87 per litre to N86.50.
“As of the close of the market on Wednesday, February 17, 2016, the subsidy element in the pricing template came down from N74.39 per litre in 2011 to minus N8 per litre for PMS (petrol)”, Mr. Farouk said.
“What this means is that the government now would be collecting N8 per every litre of petrol imported by NNPC and the other marketers, as against the usual practice where government was paying them subsidy,” he explained.
Mr. Ahmed reviewed the negative impact of the price volatility and the downward trend in the global oil market on the country’s revenue, saying crude oil price has dropped massively from a high level of $111.40 per barrel in 2011, $111.17 in 2012, $108.65 in 2013, $98.99 in 2014, $52.47 in 2015 and $31.11 in 2016.
He said as at 2015, total verified subsidy claims on petrol and household kerosene for both NNPC and other marketing firms stood at about N657 billion, against N1.22 trillion in 2014; N1.32 trillion in 2013; N1.25 trillion in 2012 and N2.11 trillion in 2011.
He attributed the drop in subsidy claims over the years to the “strict products importation reform measures introduced by his administration”, which, he said, helped address the fraudulent tendencies of some oil marketing companies.
Although he said about 58 companies, including the NNPC and its retail arm, participated in the importation of petroleum products as at the end of 2015, Mr. Ahmed said today the number has significantly been pruned to only 18, to encourage efficiency.
“There is no point giving fuel import allocation to a marketer that would give reasons why he could not import the product, while Nigerians continue to suffer due to insufficient products supply in the marker. Now, we are giving import licenses to only those firms with the capacity to import,” he said.
The outgoing PPPRA boss, who said he was bequeathing a fuel pricing template that has reversed the ugly trend from subsidy to over-recovery, said the gains of the price modulation mechanism introduced recently by the Minister of State for Petroleum Resources, Ibe Kachikwu, may be reviewed by middle of March.
“By March 15, we will look back to see the trend over the period to determine the average over-recovery. A meeting is scheduled for Tuesday with the marketers on the template, and the outcome would be part of the final review to be completed.
The General Manager (Administration & Human Resources), Moses Mbaba, who took over as the acting Executive Secretary of the agency, pledged to sustain the legacies of his predecessor towards uninterrupted supply of petroleum products at the right price.