The price of Premium Motor Spirit (PMS), also known as petrol may be increased from N165 to N302 per liter in February 2022 by the federal government as part of recommendations presented by the National Economic Council (NEC) in November 2021.
The newly recommended price was part of the government’s plan to ensure favorable competition in the market and to fully deregulate the PMS price by removing the monthly subsidy payments
This was contained in the report presented by Nasir El-Rufai, governor of Kaduna State and chairman of the NEC ad-hoc committee interfacing with the Nigerian National Petroleum Corporation (NNPC) on the appropriate pricing of PMS in Nigeria.
The committee was set up by Vice President Yemi Osinbajo to look into dwindling revenue la of States last year.
It was gathered that the Nigeria Governors Forum (NGF) also proposed N385 per liter in May 2021, a recommendation the federal government and stakeholders had rejected.
It was also gathered that the recommendation has since been reconsidered and dropped by the committee.
However, the committee in its new report recommended full deregulation of PMS prices, raising the price by about N130/140 per liter in February 2022.
According to the new report, the committee recommended that all retailers should post PMS prices at all times on their designated website and smartphone app. They are expected to post the price no earlier than 15 minutes as the price changes.
The committee also recommended a market-based price mechanism as another option that would ensure petrol price ceilings at least once a month
Also, in the report, the committee added that the federal government would save N250 billion per month on petrol subsidy removal.
The report read “At current rates, the PMS subsidy is reducing transfers into the federation by about NGN 250 billion per month, and could if PMS subsidies are not eliminated, result in deductions of NGN 3 trillion in 2022.”
“The large-scale time-limited (6-months) cash transfer proposed as a way of transferring the subsidy “directly to the people” would cost N600 billion but would by paving the way for the elimination of PMS subsidies, enable the federation to recover N3 trillion in revenues that would otherwise go to PMS subsidies.
“If PMS subsidies are eliminated by February 2022, N250 billion in deductions would have been incurred, but the remaining N195 billion in anticipated PMS subsidy deductions could be redirected towards FGN funding of the cash-transfer program.”
Other members of the committee include Godwin Obaseki, Kayode Fayemi, and David Umahi, governors of Edo, Ekiti, and Ebonyi states respectively; as well as Godwin Emefiele, governor of the Central Bank of Nigeria (CBN); and Mele Kyari, group managing director of the Nigerian National Petroleum Corporation (NNPC); Zainab Ahmed, minister of finance, budget, and national planning.
Meanwhile, the Federation Account Allocation Committee (FAAC) will meet on Wednesday (today) for the monthly meeting to distribute revenues between federal, state, and local governments.
At the last FAAC meeting, NNPC had said it would subtract some funds as value shortfall incurred due to differentials between the current PMS retail price and actual open market price in January 2022.
It was gathered that most states which are currently undergoing fiscal difficulty, kicked against the deductions of the shortfall from FAAC remittances, adding that NNPC has gone wrong to keep its responsibility of N120 billion per month for value shortfall at N162 per liter for petrol.
They also faulted the consequences of the NNPC to continue decreasing the remittances to the FAAC, while describing the deductions as “arbitrarily”.
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