An study of data provided by oil marketers and the industry has showed that the Federal Government may spend almost N1.68 trillion as a subsidy on Premium Motor Spirit, also known as petrol, from September to December this year.
Based on the depreciation of the naira against the US dollar and the rise in the price of oil on the global market, PMS dealers claimed on Thursday that the pump price of petrol should be between N890 and N900/litre.
The price of petrol currently ranges from N598 to N617 a litre, depending on where it is purchased, which feeds rumours that the Federal Government is subsidising the good.
The government and the NNPCL have not formally acknowledged the reinstatement of the petrol subsidy. During his inaugural address on May 29, President Bola Tinubu announced the end of the subsidy system.
Nigerian National Petroleum Company Limited is the vehicle through which the government finances PMS. The only importer of PMS is NNPCL. Due to their lack of access to foreign currency, several marketers ceased importing PMS.
When the subsidy was eliminated, the price of fuel at the pump rose from roughly N198/litre in May to the current level of N617/litre. However, the price of PMS has been under pressure as a result of both the naira’s decline and the increase in crude oil prices.
Over 80% of the price of PMS was determined by the price of crude oil and the naira-dollar exchange rate, according to dealers in the downstream oil industry.
On Thursday, the price of Brent crude, the world’s standard for oil, increased to approximately $95 per barrel. It had reached its highest point in 2023 the day before, peaking at $97 per barrel.
Beginning the year at roughly $82/barrel, oil fell to $70/barrel in June, but over the past week, it has traded above $94/barrel.
Following its Wednesday exchange to the dollar at 980 on the black market, the naira maintained its downward trend on Thursday.
Naira to dollar exchange rate was 950/$ a week earlier.
On the FMDQ, however, the naira strengthened somewhat after ending at 770.71/$ on Wednesday as opposed to 776.76/$ on Tuesday.
According to oil marketers, the price of fuel cannot continue to be N617 per litre due to the FX crisis and the recent increase in crude prices. They asserted that the administration had covertly reinstated fuel subsidies.
According to a media report on Thursday, in August 2023, the Federal Government paid a subsidy of N169.4 billion.
The report claimed that Nigerian Liquefied Natural Gas paid $275 million in dividends to Nigeria via NNPCL, citing a Federal Account Allocation Committee document.
Out of the $275 million, NNPCL spent $220 million (N169.4 billion at N770/$) to pay for the PMS subsidy in the review month, according to the report.
Given the ongoing devaluation of the naira, as I have stated, it is impossible for the government to maintain the price of petrol at N617 per litre without subsidising it.
“You can see the impact on the pump price of diesel,” he continued, “since the dollar is about N990 at the parallel market right now. The retail cost of PMS should be between N890 and N900 per litre given that diesel is about N1,000 per litre.
“Therefore, it is preferable for the government to help the general public by providing subsidies. According to our statistics, the super product, or gasoline, costs roughly $3.9 in the United States, or about N3,000 per litre.
