Why FG Might be Secretly Subsidising Petrol at ₦600

For over three weeks, there has been speculation about the return of the fuel subsidy, which was removed by President Bola Tinubu on May 29, 2023, during his inaugural address.

The depreciation of the naira at both the black and official markets has fueled suspicion that the government might be secretly subsidising petrol as the price has remained constant since August.

In August, SBM Intelligence reported that “since July 2023, retail petrol prices have remained unchanged, despite increases in crude oil prices, refined petrol costs, and a depreciation in the value of the Naira.”

Since 1977, when fuel subsidy was fully introduced following a hike in the price of petroleum in the global market around 1970, Nigerians became accustomed to buying refined petroleum products, particularly Premium Motor Spirit (PMS), at a subsidised price.

Over the years, the scheme has attracted criticism, with many politicians and financial analysts claiming that it is both fraudulent and unsustainable, and it serves the interests of the rich more than the poor it was intended to benefit.

Five months after President Bola Tinubu’s “fuel subsidy is gone,” there are indications to suggest that the regime is back, despite denial by the Federal Government.

On Tuesday, October 10, 2023, Group Chief Executive Officer, NNPCL, Mele Kyari, told newsmen that while NNPCL has returned as the sole importer of PMS, the government is not subsidising the product.

“No subsidy whatsoever. We are recovering our full cost from the products that we import. We sell to the market, and we understand why the marketers are unable to import. We hope that they do it very quickly, and these are some of the interventions the government is doing. There is no subsidy,” Kyari said.

But oil marketers have countered Kyari’s claims, insisting that the regime is back.

“I don’t know why the government keeps peddling lies. When they removed the PMS subsidy, a dollar was about ₦700, and they made us believe that the removal of the subsidy would make the supply of products play according to the dictates of demand and supply, looking at forex as the benchmark,” John Kekeocha, National Secretary of Independent Petroleum Marketers Association of Nigeria said.

He continued, “Now, this is just simple arithmetic. If you removed the subsidy when a dollar was about ₦700, and today the dollar is more than ₦1,000, and you are still supplying and giving products at almost the same rate, what is the magic? They are subsidizing products as we speak.

How Prices Should be Determined if the Subsidy was not back

See Also

Financial Experts Speak On How Nigerians Can Invest To Beat Inflation

With the removal of fuel subsidies, it could be said that the Nigerian petrol sector has been fully deregulated, a process that began over two decades ago with the introduction of the Oil and Gas Reforms Committee (OGRC) during the administration of Umaru Musa Yar’Adua.

It is expected that with the subsidy gone, the price of crude oil will fluctuate due to global market forces, including supply and demand, and the cost of importing petrol to Nigeria is often affected by market volatility.

In March 2023, Mele Kyari stated that the landing cost of petrol was ₦312, with the federal government subsidizing over ₦200 per litre. In a recent publication, Neusroom reported how the government spent ₦13 trillion on fuel subsidies.

With the stable price of petrol, which hovers around ₦600 in many parts of the country despite the continued depreciation of the Naira, market forces are not determining the price.

“They are spending billions of Naira to subsidize products, and because they know that this country may go on fire if Nigerians buy products at about ₦1,000 per litre, they keep twisting facts. Why can’t they come out and tell the world the truth?” Kekeocha said.