From N125 to N162 — how subsidy removal led to fluctuation of petrol price in 2020

The instability in petrol prices took a toll on Nigerians during the year, further exacerbating the pressure on their purchasing power amid soaring food prices. 

In March 2020, amid global decline of crude oil prices, the federal government (FG) introduced a price modulation policy where international crude oil prices and associated landing costs in Nigeria are used to determine the retail price of petrol. The recommended retail price is announced periodically by the Petroleum Products Pricing Regulatory Agency (PPPRA).

With the abolishment of fuel subsidy and subsequent deregulation of the downstream petroleum sector, the Petroleum Products Marketing Company (PPMC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC), took on the task of fixing the ex- depot price of petrol.

The ex-depot price is the cost at which the product is sold to marketers.

Then, marketers add their profit margin, storage and transportation cost, to determine the final retail price (customer price).

Timipre Sylva, minister of state for petroleum resources, said N500 billion earmarked for subsidy in the 2020 budget had been saved. He added that subsidy cuts would help the government save N1 trillion annually which would go towards funding critical aspects of the economy.

In an unexpected twist, Sylva later explained that the FG has not completely removed fuel subsidy.

“We are still trying to manage this bumpy start. We have not been able to get to that 100 percent removal of subsidy from the foreign exchange end,” he had said.

“If we were to take it out completely and allow people to access foreign exchange from the parallel market and allow people to import the product, the price of the pump will even be more.

“The federal government, knowing the impact it will have on the people, decided that they are still going to manage this situation.”

TheCable brings you a timeline of price of premium motor spirit (PMS), better known as petrol over the past couple of months:

March 18: FG announced a reduction in the retail pump price of petrol from N145 to N125 per litre.

April 1: PPPRA reduced the retail pump price from N125 to N123.50 per litre.

May 6 : PPMC reduced the ex- depot price of petrol from N113.28 to N108 per litre.

June 1: PPPRA reduced the retail pump price from N123.50 to N121.50 per litre.

July 1: PPPRA raised the retail pump price from N121.50 to N140.80 – N143.80 per litre.

August 5: PPMC fixed the ex-depot price of petrol at N138.62 per litre. Marketers sold at a retail price of N148 – N150.

September 2 : PPMC increased the ex-depot price of petrol from N138.62 to N151.56 per litre. Petrol sold at a retail price of N159- N162.

November 11: PPMC increased the ex-depot price of petrol from N147.67 to N155.57 per litre. Retail outlets sold petrol for N168- N170.

December 8: FG reduced the retail pump price of petrol from N168 to N162.44 per litre with effect from December 14. The reduction, FG explained, was possible because the NNPC agreed to cut freight and demurrage costs.