Nigeria was thrown into a mild fit on Wednesday, September 2, when the Federal Government announced that the price of Premium Motor Spirit (PMS), popularly known as petrol, was increased from N145 to N151.56 per litre with effect from September 2, 2020.
Background: This development was communicated in an internal memo released by the Pipeline and Product Marketing Company (PPMC), Ibadan depot, to all the stakeholders on September 2, 2020.
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But a few days before the announcement of the new petrol pump price was made, a media source hinted that the Federal Government via the Nigerian National Petroleum Corporation (NNPC) made petrol subsidy payments In June.
The NNPC, in its monthly financial and operations report on August 30th, said it incurred N5.35 billion as under recovery in June 2020.
The implication of subsidy payments continuing would mean that the price of PMS will remain stable while the government pays off the margins.
The PPMC internal memo reads, ‘’Please be informed that a new product price adjustment has been effected on our payment platform. To this end, the price of premium motor spirit (PMS) is now one hundred and fifty-one naira, fifty-six kobo (N151.56) per litre. This is effective 2nd September 2020.
Quashing All Doubt: The Minister of State for Petroleum Resources, Chief Timipre Sylva, while addressing newsmen in Abuja on Friday, disclosed that the Federal Government is not currently in a position, that is, no longer in a financial position to pay subsidy.
He further disclosed that since the introduction of the deregulation policy in March 2020, the country had saved about N1 trillion and up to N500 billion in foreign exchange differentials.
Sylva further said:
“It became necessary that the country cannot sustain subsidy payments, hence the decision to deregulate. Government has stopped subsidizing petrol at the pump…”
“We are no longer in the business of fixing prices; we have stepped back and allowed market forces to determine the prices. Henceforth, if crude oil price go up or down, it would reflect at the pumps.”
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Bottomline: The financial statement from the NNPC has tainted the assertion by the Federal Government on subsidy payments. A forensic review of the claims by the NNPC will reveal where the money went to if it was not paid to oil marketers for subsidy.
In the bigger picture, the new regime of no subsidy payment in the downstream sector, though may continue to shock Nigerians especially as they are still reeling from the negative economic effect of the coronavirus pandemic, is still considered a plus on the long run for cutting the recurrent expenditure weighing the Federal Government down.
If well managed, it should have net positive effect in the near term.
Featured image source: BusinessDay
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