The torrential fall of the Naira which has turned the petroleum supply chain into a quagmire is fast eroding the projected gains after the federal government finally removed the petrol subsidy regime.
Oil marketers and government officials also appear not to be on the same page when it comes to the actual landing cost of Petroleum Motor Spirit and the impact that Nigeria’s fluctuating currency has had on the importation of the product.
Presently, it has been calculated that landing cost of Premium Motor Spirit, PMS also called petrol has averaged N1,009 a liter going by prevailing rate of N1,500 per dollar, from N720 per litre recorded in October 2023.
Though, this cannot independent be confirmed by our Correspondent as President of Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Billy Gillis-Harry, said such figures may still be disputed because there are other associated costs like insurance, port charges and cost of hiring vessels.
It has also been reported that the country is paying about N907.5 billion subsidy on petrol monthly as the country’s foreign exchange crisis pushed the actual cost of litre of fuel to N1,203, signalling a return of subsidy regime.
However, an inside source at the Nigerian National Petroleum Company Limited, NNPCL, denied the insinuation.
The source said such reports are falsehood and should be disregarded as subsidy has gone.
“I think we should take a look at the provisions of the Petroleum Industry Act, PIA, which gives the NNPCL the responsibility to ensure energy security at any time. Though it operates as a limited liability company that pays dividend to shareholders, nonetheless the PIA vests that responsibility to the Company to provide buffer and secure the country’s energy demands and perhaps that is what is erroneously being interpreted as return of Subsidy.
The group CEO of the Nigerian National Petroleum Company (NNPC) Limited, Mele Kyari, had said at the birth of NNPCL that the country was spending over N400 billion monthly on petrol subsidy, but investigations into Nigeria’s petrol pricing dynamics have revealed a significant surge in the landing cost of petrol, attributed to the escalating exchange rate.
In his views, the chief executive officer, CEO, of the Center For The Promotion Of Private Enterprises, CPPE, Dr. Muda Yusuf, said, “Evidently, the currency depreciation has partially eroded the subsidy savings.”
According to Yusuf, this is because the cost of fuel importation has increased, when converted to naira, adding.
Besides, the mounting inflationary pressures has inherently increased the subsidy because the pump price had remained fixed while the landing cost has been on the increase.”
This he said is understandable in the light of the current hardships being experienced by the citizens.
“The government is unlikely to go back to full subsidy. Doing so, would amount to a complete reversal of a major pillar of the current reforms. Besides the government do not have the fiscal space to ensure full restoration of subsidy.
“The objective of the reform is actually to exit completely from fuel subsidy regime. But this will take some time as the economic fundamentals are still weak.” he advised.
Just recently the International Monetary Fund (IMF) claimed that the Nigerian government has, through the backdoor, resumed the payment of subsidies on petrol.
LEADERSHIP WEEKEND writes that on May 29, 2023, President Bola Tinubu announced an end to petrol subsidy, which caused a hike in the prices of goods and services in the country.
Following that announcement, the Central Bank of Nigeria (CBN) collapsed the different exchange rate regimes into one, with the value of the naira to the dollar weakening.
The IMF recently issued a statement on the conclusion of its Executive Board’s Post Financing Assessment with Nigeria, during which it expressed concerns that the government had capped the prices of fuel at retail stations.
The IMF advised Tinubu to completely stop the payment of subsidies on petrol to free funds to run the government.
In reaction, some Groups and individuals rejected the IMF position for what they described as “anti-masses policies”, and called on Nigerian government to explore home grown options that would fix the economy and better the life of the people.
But the minister of Information and National Orientation, Mohammed Idris, on Wednesday, said petrol importation in the country reduced by 50 per cent since the withdrawal of the fuel subsidy.
Idris said this at the third edition of the ministerial press briefing series, where the coordinating minister for Health and Social Welfare addressed journalists in Abuja.
He said,“Petrol importation has been reduced by 50 per cent since the withdrawal of the fuel subsidy. The Nigerian Stock Exchange All Share Index crossed the 100,000 mark – its highest ever, mainly due to the pragmatic reforms initiated by the President, which inspired investor confidence in the Nigerian economy.
It is also encouraging to state that oil production has risen from 1.22 million barrels per day in the second quarter of 2023 to 1.55 million barrels per day in the fourth quarter of 2023.”
President Bola Tinubu announced the removal of petrol subsidy during his inaugural address on May 29, 2023, saying, “Subsidy is gone.”
Idris notes that President Tinubu has also given a directive for the design of a Social Security Unemployment Programme to cater for unemployed graduates.
Equally, President Bola Ahmed Tinubu, has stated that the decision of his administration to remove subsidy on Premium Motor Spirit (PMS) was premised on the need to ensure long-term energy security and economic prosperity of Nigeria.
Tinubu stated this in his keynote address at the opening ceremony of the 7th Nigerian International Energy Summit (NIES) at the Banquet Hall of the Presidential Villa, Abuja on Tuesday, 27th February, 2024.
The president who was represented at the event by the minister of Information and National Orientation, Mohammed Idris, noted that the petroleum subsidy had, over the years, strained the country’s economic resources, leading to inefficiencies and, most importantly, hindering ability to invest in critical areas of energy security.
He admitted that the decision to remove the petroleum subsidy was a challenging one, but stressed that it was a step that must be taken to secure Nigeria’s energy future and foster economic growth.
He added that by removing the subsidy, “We are creating a more transparent and accountable energy sector. The funds that were previously allocated to subsidizing petroleum products are now redirected towards developing and upgrading our energy and other social infrastructure”.
However, the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) said the only way out of this quagmire is to tap and explore the country’s vast gas deposits and bring it into useful disposition.