The Federal Government is potentially staring at a N1.68tn fuel subsidy bill for the last quarter of 2023, as oil marketers indicate that the pump price of petrol should range between N890 to N900/litre. This projection comes in light of the depreciating naira and the surge in global crude oil prices.
The Current Situation
Petrol is currently retailing between N598 and N617/litre across different regions, sparking suspicions that the Federal Government is subsidising the commodity. This is despite President Bola Tinubu’s announcement in May, ending the subsidy regime.
Although the Nigerian National Petroleum Company Limited (NNPCL), the sole importer of PMS, and the government have not officially acknowledged the reintroduction of the subsidy, the naira’s downfall and the upswing in crude oil prices are putting intense pressure on petrol costs.
Factors Affecting the Pricing
According to industry insiders, the cost of crude oil combined with the naira-dollar exchange rate comprises over 80% of the PMS cost. Brent crude touched $95/barrel recently, with Nigeria’s own crude trading around the same mark. Concurrently, the naira has been on a decline, exchanging at 980 to the dollar on the parallel market.
Implications of the Current Trend
Based on the ex-depot price of petrol and the potential unsubsidised rate, the government may currently be subsidising about N290/litre. If the current consumption rates persist, and the naira continues to slide against the dollar, the government could end up with a staggering subsidy bill of N1.68tn for the final four months of 2023.
Past Subsidy Expenses
Before its official termination in May, the fuel subsidy had drained trillions from the government coffers. Between 2015 and 2020, subsidies had cost Nigeria about N1.99tn, as per a report by the Nigeria Extractive Industries Transparency Initiative. NNPCL data further revealed that the subsidy consumed N1.57tn in 2021 and N1.27tn from January to May 2022.
Stakeholder Reactions
As the possibility of the subsidy’s return looms, stakeholders have given mixed reactions. While IPMAN’s National Secretary, Chief John Kekeocha, lauded the government for considering citizens’ welfare, he also emphasized the need for transparency on the subsidy topic.
Chinedu Okoronkwo, the President of IPMAN, urged against speculating on the subsidy’s comeback. He stressed the government’s commitment to keeping petrol prices stable, especially given the political implications of the product.
However, civil society organizations have voiced their concerns. The Centre for Anti-corruption and Open Leadership expressed skepticism about maintaining steady petroleum prices, suggesting oil cartels might exploit the situation. The Civil Society Legislative Advocacy Centre also criticized the government for a lack of transparency and accountability.
The rising global oil prices combined with the declining naira value are setting the stage for challenging economic decisions. As the government mulls over the potential reintroduction of the fuel subsidy, Nigerians await clarity and hope for solutions that consider the well-being of the masses.
