Thursday, October 1, 2020

Confusion as subsidy returns, NNPC pays N5.4bn as in recovery

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Amid the turmoil in the downstream oil industry, regarding its deregulation, the Premium Motor Spirit subsidy, PMS, also known as gasoline, has resurfaced once again, as the Nigerian National Petroleum Corporation, NNPC , over the weekend, said it incurred N5.35 billion as in recovery in June 2018.

Insufficient recovery, also known as a subsidy, occurs when the pump price of gasoline is lower than the actual cost price of the commodity. In this case, the NNPC, through its subsidiary, NNPC Retail or oil traders, sells the product to motorists at a particular price, which is less than the cost of the product, and pays itself a subsidy. to cushion the loss.

According to its June 2020 monthly financial and operational reports released over the weekend, the NNPC said it had recorded zero subsidy payments in April and May 2020, after having recorded a recovery of 43.31 billion naira, 20.68 thousand million naira and 37.66 naira. billion in January, February and March 2020, respectively.

The confusion arose from the fact that the Minister of State for Petroleum Resources, Chief Timipre Sylva, had few weeks of support, stated that the Federal Government had deregulated the downstream oil sector since March 2020, thus relieving the government of the burden of subsidizing fuel and giving oil traders the freedom to determine the price of fuel, with the guidance of the Petroleum Products Prices and Regulatory Agency, PPPRA.

Confirming this as well, NNPC Group Managing Director Mallam Mele Kyari had stated in April 2020 that the fuel subsidy was gone forever and that, in the future, market forces would be responsible for determining the price. of the product.

When contacted, Group General Manager, NNPC Group Public Affairs Division, Dr. Kennie Obateru, promised to provide an additional update on the resurgence of insufficient recovery in his finances.

The NNPC’s June 2020 report further indicated that in the month under review, the corporation earned Naira 58.3 billion from the sale of domestic crude oil, of which it spent Naira 5.35 billion on recovery, also known as a subsidy. to fuel.

The NNPC also recorded losses of petroleum products of 1.4 billion naira; and pipeline repair and administration costs of N 6.24 billion.

The NNPC, according to the report, also received N10.12 billion of gas and other receipts; while it registered total remittances of N81.4 billion; spent N48.95 billion on joint venture cost recovery projects and government priority projects; before remitting N19.46 billion to the Federation Account.

The reappearance of the subsidy, according to the NNPC, was due to an increase in the price of crude in the international market, which affected the price of the PMS at the local level.

The NNPC said: “In June 2020, the average price of crude oil increased further by $ 10.04, or 34.7 percent, month-over-month, m-o-m, to $ 38.97 a barrel. Similarly, OPEC’s benchmark basket (ORB) increased by $ 11.88, or 47.2 percent per month, to $ 37.05 per barrel, while ICE Brent and NYMEX WTI increased by $ 8.36, or 25.8 percent and $ 9.79, or 34.3 percent, to close at $ 40.77. per barrel and $ 38.31 per barrel respectively.

“As reported in OPEC’s Monthly Oil Market Report (MOMR), crude oil spot prices continued to rise in June for the second month in a row due to the improvement in the fundamentals of the physical crude market and the gradual reduction in excess supply. This development suggests that the first half of 2020 was ending on a more positive note than expected. “

The report added that NNPC’s downstream subsidiary, Petroleum Products Marketing Company, PPMC, sold 1.35 billion liters of white petroleum products, comprising gasoline, kerosene, and diesel, in June 2020, valued at N134. , 22 billion; compared to 950.67 million liters, valued at N92.58 billion recorded in May 2020.

However, the report revealed that the NNPC posted a trade surplus of N2.12 billion in the month under review, falling 20.9 percent, compared to a surplus of N2.68 billion recorded in May.

The NNPC report further indicated that the corporation’s operating income appreciated by 32.05 percent, or N76.39 billion to N314.72 billion in June, compared to N238.33 billion recorded in May. from 2020; while its spending stood at N312.95 billion, increasing by 32.8 percent or N77.30 billion, from N235.65 billion registered in May.

The NNPC said: “June 2020 indicates a smaller trade surplus of N2.12 billion compared to the surplus of N2.68 billion in May 2020, when the world began a fragile recovery from the COVID-19 effect. The 21% net increase in yield is primarily attributed to the 166% increase in surplus recorded by NPDC; reflecting the continued global rise in market fundamentals for the second consecutive month.

“In addition, PPMC continued to enjoy the decline in the average cost of landing the product, as profits increased by 22%; while the Nigerian Gas Company, NGC intakes; Nigeria Gas Trading Company, NGMC; and Duke Oil Incorporated grew 16 percent, 1 percent, and 127 percent, respectively.

“All other Strategic Business Units, SBU, posted more loss positions with Corporate Headquarters, CHQ, and the deficit increased by 71 percent compared to last month due to increased terminal benefits for retired staff, thus reducing the group’s surplus for this month “

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