FG still pays subsidy on petrol –PPPRA boss

The Petroleum Products Pricing Regulatory Agency (PPPRA) has explained that even with the pump price of N87 per litre re­cently announced by the Federal Government, it is still subsidising the pump price of petrol in favour of consumers.
The Executive Secretary of PPPRA, Mr. Farouk Ahmed, who made the clarification in a press state­ment in Abuja at the week­end, stated that the price of crude oil dropped to a point where the open mar­ket price of petrol also fell to a level the government considered appropriate to relieve some of the burden imposed on Nigerians by the knock-on effect of the dwindling price of crude oil on the economy.
According to him, the price of crude oil averaged $62 in December 2014 and dropped to an average of $50 per barrel for the first half of January 2015. It was after a consistent and diligent monitoring of the trend, since the begin­ning of the current drop in crude oil price that govern­ment was able to confirm its ability to reduce the pump price of gasoline commen­surate with the amount an­nounced. He explained that even at the lowest crude oil price of $47.23 recorded on January 16, 2015, the open market price of petrol was about the same as the erst­while price of N97/litre.
“What this means is that at the new price of N87 per litre, government is still subsidising the pump price of petrol,” Ahmed ex­plained.
On the argument that the price of crude oil has reduced by about 50 per cent and so the pump price of petrol must reduce in the same ratio, Ahmed ex­plained that crude oil price is only one of the several components in deriving the pump price of petrol. There­fore, there is no linear rela­tionship between the price of crude oil and the pump price of petrol, adding that when the price of crude oil reached its peak of $114.26 per barrel on June 18, 2014, the open market price of petrol was N157, but gov­ernment still maintained the regulated price of N97 per litre and subsidised the dif­ference of N59.51 per litre.
Ahmed noted that in de­termining the amount of re­duction on the pump price of petrol, government was mindful of the impact that an upward swing in the price of crude oil would mean on the amount of sub­sidy exposure.