Subsidy on Premium Motor Spirit, PMS, also known as petrol, has once again resurfaced, as Nigerian National Petroleum Corporation, NNPC, weekend, said it incurred N5.35 billion as under recovery in June 2020.

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, NNPC, through its subsidiary, NNPC Retail or through oil marketers, sell the product to motorists at a particular price, which is lower than the cost of the product.

According to its Monthly Financial and Operation Reports for June 2020, released weekend, NNPC said it had recorded zero subsidy payments in April and May 2020, after it had recorded under recovery of N43.31 billion, N20.68 billion and N37.66 billion in January, February and March 2020 respectively.

The confusion stemmed from the fact that Minister of State for Petroleum Resources, Mr Timipre Sylva, had few weeks backs, stated that 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 Petroleum Products Pricing and Regulatory Agency, PPPRA.

Confirming this also, Group Managing Director of NNPC, Mr 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  NNPC, Mr Kennie Obateru, said: “The under-recovery in the report represents payment for stock held by marketers at the onset of the removal of subsidy by federal government. Since the subsidy removal started with reduction in pump price, marketers have to be paid the differential of PPPRA verified stock they held and it is spread over a period of six months.”

Vanguard