The falling price of crude oil at the international market, which is threatening the capacity of the federal government to finance the 2015 budget, has however provided relief to the government in the area of payment of fuel subsidy to oil marketing and trading (OM &T) companies and other importers of petroleum products, THISDAY has gathered.

THISDAY gathered that subsidy claims, which stood at N44 per litre in June 2014 when the price of crude oil at the international market was $115 per barrel, have fallen to 90 kobo per litre as the crude oil price dropped to $56.42 at the weekend.
The price had fallen to a post-2009 low of $55.48, and averaged around $110 a barrel between 2011 and 2013, before hitting $115 in June this year.

The reduction of subsidy claims from N44 per litre to N0.90 represents 97.95 per cent drop in subsidy claims since crude oil price began its free fall.

This development, it was learnt, has drastically reduced the federal government’s indebtedness to marketers on subsidy claims.

With the drop in the price of crude oil, which has equally led to a drop in the price of petroleum products, subsidy claims have reduced from N44 per litre of petrol or N1.54 billion daily to N0.90 per litre or N31.5 million daily.

This reduction effectively represents daily savings of N1.225 billion into the federal government’s coffers.

At the crude oil price of $115 per barrel, the expected open market price of imported petrol is N141 per litre, while the regulated price is N97, translating to a difference of N44 as subsidy.

Statistics by the Petroleum Products Pricing Regulatory Agency (PPPRA) indicates that the country consumes 35 million litres of petrol daily at regulated price of N97 per litre, and with N44 paid per litre as subsidy, the government spends N1.54 billion daily.

But with the drop in the price of crude oil at $56 per barrel, the landing cost of PMS has since dropped to N82.41 per litre, while the expected open market price has also crashed to N97.90, against the official pump price of N97 per litre.

According to the latest pricing template released at the weekend by the Petroleum Products Pricing Regulatory Agency (PPPRA) the subsidy element has equally dropped to N0.90 per litre, representing the new difference between the official pump price of N97 and the expected market price of N97.90.

With the drop in subsidy from N44 per litre or N1.54 billion daily to N0.90 per litre or N31.5 million daily, the federal government is enjoying a relief of up to the tune of N1.225 billion daily.

The government is now paying N31.5 million daily, against the N1.54 billion it was paying before the drop in the price of crude oil.

Though the drop in the price of crude has reduced government’s bills on subsidy, the government and the oil –producing companies operating in Nigeria have lost estimated $11.5 billion oil revenue.

                        Source: THISDAY