The sharp drop in the price of crude oil appear to have temporarily halted the federal government's expenditure on petrol subsidy, records from the Petroleum Products Pricing Regulatory Agency (PPPRA) have suggested.
Following the slump in crude oil price, the PPPRA indicated in its daily price template that the landing cost of a litre of petrol has steadily been declined as well.
For instance, the agency on March 11, disclosed that based on its calculations, the Expected Open Market Price (EOMP) for a litre of petrol was N112.26 while the ex-depot price was N125.63.
At the official pump price of N145 per litre, the calculation indicated a N32.74 over-recovery for the Nigerian National Petroleum Corporation (NNPC) which is currently the sole importer of petrol in the country.
Similarly, on March 10, the PPPRA template indicated that the EOMP for petrol was N114.53 per litre and an over-recovery of N30.47 for the NNPC. On March 9, the template also showed that the landing cost or EOMP was N116.22 and an over-recovery of N28.78 on a litre of petrol.
Through the NNPC, the federal government subsidises consumption of petrol by Nigerians and has pegged the pump price of petrol at N145 per litre.
The practice has also resulted in the NNPC often claiming huge financial payments as costs of subsidising petrol consumption.
In 2019, the NNPC disclosed to the Federation Account Allocation Committee (FAAC) that it spent N623.16 billion to subsidise petrol consumption in the country between January and November of 2018.
Similarly, a review of the corporation's monthly financial and operations report showed that it spent an extra N13.336 billion on subsidy in December 2018 and then N104.347 billion and N102.338 billion between January and February 2019 to bringing the figure on its subsidy expenditure to N843.121 within 13 months.
Between January and April 2019, the NNPC according to its monthly reports spent a total sum of N326.43 billion on petrol subsidy or under-recovery as it often referred to it. The expenditure included N104.35 billion incurred in January for keeping pump price at N145 per litre; N102.24 billion in February; N30.64 billion in March and N89.2 billion in April.
Within these months, the corporation indicated that average daily petrol consumption in the country was 50 million litres.
In its latest Article IV consultation on Nigeria, released last month, the International Monetary Fund (IMF) had advised the federal government to cut down its expenditure on petrol subsidy especially with regards to potential low global oil prices and the country's diminishing revenue from oil.
The Group Managing Director, Nigeria National Petroleum Corporation (NNPC), Mallam Mele Kyari, last week expressed the corporation's readiness to strategically put in place measures to alleviate the cost of crude oil production in Nigeria to create market for Nigeria's crude.
He noted that due to the Coronavirus pandemic, Nigeria has about 50 cargoes of crude oil that have not found landing, adding that this implied that there are no off-takers for them for now due to drop in demand.
He said in the face of the Coronavirus global pandemic, countries like Saudi Arabia have given discount of $8 and Iraq $5 to their off-takers in some locations meaning that when crude oil sells at $30 per barrel, countries like Saudi Arabia is selling at $22 per barrel and Iraq selling their crude at $25 per barrel.
According to him, the oil price crash on Monday signified the importance of oil to the global economy.
He added that oil price will continue to shape activities in the global economy.
"We used to say when the financial sector collapses, everything collapse. But certainly, it is the other way round. When the oil market collapses, everything collapses. So oil is the only commodity that the beneficiaries panic when the price goes up," Kyari said.
He predicted that fossil fuel would remain significant contributor to energy need in the next 40 years.
"But what would not be there in the next 40 years would be inefficient producers because as we speak today, we are getting production from the least expected places. Nearly every country now produces oil and that means that the best of people who would remain are the people who would produce oil at the cheapest cost.
"Much as these are high expectations, but you must produce them today even at low prices. And the assumption for this year was $60 per barrel. Now, we are facing sub $30 per barrel and potentially we haven't seen the bottom. We haven't! And this is a challenge to us as a country and it is difficult to manage. It simply implies huge deficit for all of us and it would radiate in all sectors, including the financial sector," he said.