Confusion As Subsidy Returns …NNPC Pays N5.4bn For Under Recovery
LAGOS
AUGUST 31ST (NEWSRANGERS)-Amidst
confusion in the downstream petroleum industry, concerning its deregulation,
subsidy on Premium Motor Spirit (PMS), also known as petrol, has once again
resurfaced, as the Nigerian National Petroleum Corporation (NNPC), weekend,
said it incurred N5.35billion as under recovery in June, 2018.
Under-recovery, also known as subsidy, occurs when the pump price of petrol is
lower than the actual cost price of the commodity.
In this case, the NNPC, through its subsidiary, NNPC Retail or through oil
marketers, sells the product to motorists at a particular price, which is lower
than the cost of the product, and pays itself subsidy to cushion against the
loss.
According to its Monthly Financial and Operation Reports for June, 2020,
released weekend, the NNPC said it had recorded zero subsidy payments in April
and May, 2020, after it had recorded under recovery of N43.31billion,
N20.68billion and N37.66billion in January, February and March, 2020,
respectively.
The confusion stemmed from the fact that the Minister of State for Petroleum
Resources, Chief Timipre Sylva, had few weeks back, stated that the Federal
Government had deregulated the downstream petroleum sector since March, 2020,
thereby relieving the government of the burden of fuel subsidy and giving oil
marketers the freedom to determine fuel price, with guidance from the Petroleum
Products Pricing and Regulatory Agency (PPPRA).
Also confirming this, Group Managing Director of the NNPC, Mallam Mele Kyari,
had in April, 2020, declared that fuel subsidy was gone forever, and that going
forward, market forces would be responsible for determining the price of the
commodity.
When contacted, Group General Manager, Group Public Affairs Division of the
NNPC, Dr. Kennie Obateru, promised to provide further update on the
re-emergence of under-recovery on its financials.
The NNPC June, 2020, report further stated that in the month under review, the
corporation earned N58.3billion from domestic crude oil sale, from which it
spent N5.35billion on under recovery, also known as fuel subsidy.
The NNPC also recorded petroleum products loss of N1.4billion; and pipeline
repairs and management cost of N6.24billion.
The NNPC, according to the report, also received N10.12billion from gas and
other receipts; while it recorded total remittances of N81.4billion; spent
N48.95billion on Joint Venture Cost Recovery and Government Priority Projects;
before remitting N19.46billion to the Federation Account.
The reappearance of subsidy, according to the NNPC, was as a result of a rise
in the price of crude oil in the international market, which affected the price
of PMS locally.
The NNPC said, “In June, 2020, the average crude oil price further increased by
$10.04, or 34.7 per cent, month-on-month, m-o-m, to $38.97 per barrel.
“Similarly, the OPEC Reference Basket (ORB) increased by $11.88, or 47.2 per
cent m-o-m, to $37.05 per barrel, while ICE Brent and NYMEX WTI rose by $8.36,
or 25.8 per cent and $9.79, or 34.3 per cent, to close at $40.77 per barrel and
$38.31 per barrel, respectively.
“As reported in the OPEC Monthly Oil Market Report (MOMR), spot crude oil
prices continued to rise in June for the second consecutive month due to
improvement in physical crude market fundamentals and the gradual reduction in
supply overhang. This development suggests that the first half of 2020 was
ending on a more positive note than expected.”
The report added that the NNPC downstream subsidiary, the Petroleum Products
Marketing Company (PPMC), sold 1.35billion litres of white petroleum products,
comprising petrol, kerosene and diesel, in the month of June, 2020, valued at
N134.22billion; compared with 950.67 million litres, valued at N92.58billion
recorded in May, 2020.
However, the report disclosed that the NNPC recorded a trading surplus of
N2.12billion in the month under review, dropping by 20.9 per cent, compared to
a surplus of N2.68billion recorded in May.
The NNPC report further stated that the corporation’s operating revenue
appreciated by 32.05 per cent, or N76.39billion to N314.72billion in June,
compared to N238.33billion recorded in May, 2020; while its expenditure stood
at N312.95billion, rising by 32.8 per cent or N77.30billion, from
N235.65billion recorded in May.
The NNPC said: “June, 2020 indicates a lower trading surplus of N2.12billion
compared to the N2.68billion surplus in May, 2020, when the world began a
fragile recovery from the Covid-19 effect. The 21 per cent net increase in
performance is attributed primarily to the 166 per cent rise in surplus posted
by NPDC; reflecting ongoing global rise in market fundamentals for the second
consecutive month.
“In addition, PPMC continued to enjoy the drop in average product landing cost
as profit increased by 22 per cent; while takings from Nigerian Gas Company
(NGC); Nigerian Gas Marketing Company (NGMC); and Duke Oil Incorporated grew by
16 per cent, one per cent and 127 per cent, respectively.
“All other Strategic Business Units (SBU), recorded further loss positions with
Corporate Headquarter (CHQ), deficit increasing by 71 per cent compared to last
month due to increased terminal benefits made to retired staff, thus reducing
the group surplus for this month.”
The Tide
Short URL: https://newsrangers.com/?p=56371
Posted by News Rangers
on Aug 31 2020. Filed under National.
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