FG reintroduces kerosene subsidy as oil prices surge

Latest data from the pricing templates of the PPPRA, has revealed that the federal government has reintroduced the payment of subsidy on kerosene to the tune of N1.17 for every litre of the product consumed across the country.
The PPPRA is the agency of the federal government that fixes and regulates the prices of white products like petrol and kerosene, as well as other refined petroleum products across the country.
Earlier this year, the PPPRA’s price template for the product, which is a common household energy source, had indicated that there was no more subsidy on the product, a development which many had seen as an indication of the end of the subsidy regime. However, minister of state for petroleum resources, Dr Ibe Kachikwu had insisted that the federal government never terminated petrol and kerosene subsidy, and that the all the move was simply a modulation of the prices of the commodities in view of the global price crash in oil prices.
The latest figures from the PPPRA has lent credence to this, with the commencement of subsidy payment likely predicated on the rise in the price of crude oil to $40 per barrel.
The figures revealed that the expected open market price (true cost) of kerosene at filling stations run by independent/major oil marketers was N84.17 per litre, as against the official approved retail pump price of N83 per litre at which the outlets are mandated to sell the product. The PPPRA also stated in its template that the government was making an under recovery of N1.17 on every litre of kerosene consumed in the country; meaning that the commodity is being subsidised to the tune of N1.17 by the government.
In a related development, global prices of oil rose for a third straight day yesterday, March 17 a development that has seen a rise in the price of Brent crude, against which Nigeria’s oil is priced, to $42.29 dollars, $4.29 higher than the country’s proposed benchmark of $38 for the 2016 budget.
While some may see this as a welcome respite in the face of the nation’s dwindling revenue occasioned by the earlier crash in oil prices, others might see the rising prices more as a hindrance to the fulfillment of the nation’s potentials as government may revert to its over-dependence on oil proceeds.
The federal government has made several pledges to diversify the nation’s economy and develop other sources of revenue that will rival the oil sector, with emphasis on the agricultural and solid minerals sectors as possible replacements for the oil cash cow. Also, Vice President Yemi Osinbajo, earlier this year, had described the dwindling oil prices as a blessing as it allowed the federal government free up about $5 billion which would have been paid as subsidies to petroleum importers.

However, the re-surging oil prices, while signaling an improvement in the country’s finances, may also mean that the government will jettison the efforts at economic diversification as the petrol dollars begin to roll in once again.