Nigeria’s petrol subsidy has returned and is now bigger than the amount being paid before President Bola Tinubu stopped the costly practice last May.
BusinessDay’s analysis has revealed that the country is paying about N907.5 billion subsidy on premium motor spirit (PMS) popularly known as petrol monthly as the country’s foreign exchange crisis pushed the actual cost of litre of fuel to N1,203.
One week before the 2023 presidential election which brought in the new administration, Mele Kyari, the Group CEO of the Nigerian National Petroleum Company (NNPC) Limited, said at the final cutover ceremony of NNPC and the birth of NNPCL at the corporation’s towers in Abuja, that the country is spending over N400 billion monthly on petrol subsidy.
Recent investigations into Nigeria’s petrol pricing dynamics have revealed a significant surge in the landing cost of petrol, attributed to the escalating black-market exchange rate.
According to findings, at the prevailing black-market rate of N1,500 per dollar, the landing cost of petrol has soared to N1,009 per litre, marking a substantial increase from N720 per litre recorded in October 2023.
Till date, the state-owned oil company remains the sole importer of petrol into Nigeria, despite the passing of the Petroleum Industry Act 2021 and the deregulation of the downstream sector, which allows for other private oil marketers who are licensed to import the product into the country.
However, accessing forex required for the importation of the commodity has proved difficult, leading to them depending on the state-owned oil company.
More than 90 licensed marketers, tasked with importing petroleum products into Nigeria, find themselves hamstrung by an unresolved price differential, rendering them unable to bring in any products nearly nine months after President Bola Tinubu announced the deregulation of the downstream segment of the petroleum industry.
Jide Pratt, country manager of TradeGrid, said that marketers need access to forex to import the refined product into the country to change this development.
According to him, it will be beneficial for all parties if the NNPC stops being the sole importer of petrol into Nigeria.
In his calculations, PMS Eurobob delivered to West Africa was $867.60 per tonne. There are 1000 litres in every tonnes, which brings the landing cost of petrol per litre in Nigeria to $0.87.
“With an exchange rate of N1,555/$, the retail price should be estimated at N1098 per litre,” he said. “Alot needs to be done.”
President Bola Tinubu announced that petrol subsidy is gone in his inauguration speech in May 2023. Prior to this, there was a difference of close to N202 for every litre of PMS imported into this country.
Kyari said in February 2023: “In current data terms, the landing cost was around N315/litre. Our customers are here, we are transferring to each of them at N113 per litre.
“That means there is a difference of close to N202 for every litre of PMS we import into this country.
“In computation, N202 multiplied by 66.5 million litres, multiplied by 30 will give you over N400 billion of subsidy every month.”
Meanwhile, Eze Odiri, a public sector consultant, said that there is no way Nigeria can earn substantial forex as the NNPCL has already mortgaged future production volumes for upfront cash.
“We don’t earn any forex. Until NNPCL starts giving us dollar revenues, it will keep on going up as our importation is still high,” he said. “Our non-oil exports are still too small. Then our remittances from diaspora are not getting to the CBN.”