Following an increase in the landing cost of petrol into the country, the subsidy will rise as the pump price of petrol stays stable at ₦162-N165 per liter.
The landing cost of petrol had climbed to ₦282.29 per liter as of January 20, as the international oil benchmark, Brent crude, jumped to $89.75 per barrel that day from $77.24 per barrel on December 31, 2021.
Brent rose further on Wednesday to $90.22 per barrel as of 5.19 pm Nigerian time, its highest level since 2014.
The increase in the global prices has increased the subsidy cost being incurred by the Federal Government.
The development has seen marketers increase the price of Automotive Gas Oil, also known as diesel, to ₦355-₦360 per liter.
The Petroleum Products Pricing Regulatory Agency in March last year released a pricing template that indicated the guiding prices for the month.
The template that was released by the agency showed that the petrol pump price was expected to range from ₦209.61 to ₦212.61 per liter.
The template, however, was condemned by Nigerians and was later deleted by the agency from its website.
It was based on an average oil price of $62.22 per barrel, and the landing cost of petrol was put at ₦189.61 per liter.
Based on the PPPRA template and Platts data, the expected pump price of petrol rose to ₦305.29 per liter on January 20, 2022, from N299.94 per liter on October 8, 2021.
The expected retail price of ₦299.94 per liter and the current pump price of ₦162 per liter indicate a subsidy of ₦143.29 per liter as of January 20.
With daily petrol consumption put at about 60 million liters by the NNPC and a subsidy of ₦143.29 per liter, daily subsidy amounts to N8.60bn.
The rising price of crude oil pushed the cost of petrol quoted on Platts to $837.75 per metric tonne (₦260.09 per liter, using the I&E rate of ₦416.33/$1) on January 20, 2020, from $754.75 per MT on December 31, 2021, with a freight cost of $26.77 per MT (₦8.31 per liter).
Other cost elements that make up the landing cost include lightering expenses (₦4.81), Nigerian Ports Authority charge (₦2.49), Nigerian Maritime Administration and Safety Agency charge (₦0.23), jetty throughput charge (₦1.61), storage charge (₦2.58), and financing (₦2.17).
The pump price is the sum of the landing cost, wholesaler margin (₦4.03), admin charge (₦1.23), transporters allowance (₦3.89), bridging fund (₦7.51), marine transport average (₦0.15), and retailer margin (₦6.19).
