Fuel prices will rise significantly after the removal of subsidy in June, selling between N360 and N400 per liter, according to the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN).
This was disclosed to journalists by PENGASSAN president Festus Osifo, during the association’s National Executive Council meeting (NEC) held in Abuja on Tuesday.
Osifo made the disclosure as concern mounts over what the cost of petroleum products will be in coming months, following a claim by petroleum marketers and stakeholders in the downstream sector, that fuel will sell as much as N750 per liter when the subsidy is removed.
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In August 2022, the Minister of Finance, Budget and National Planning, Zainab Ahmed, announced that the subsidy removal will be implemented by the first half of 2023. The announcement has triggered speculation that fuel will be sold at international market rate, making it unaffordable for the majority of the Nigerian people.
Allaying the concern, Osifo said that fuel prices will be determined by the sole importer of Premium Motor Spirit (PMS), the Nigerian National Petroleum Company Limited (NNPCL), using the official exchange rate.
“Today, the sole importer of PMS into Nigeria is the NNPC. The NNPC is using an exchange rate of the CBN which gives about N400 to N450 depending on the day and depending on the window that you are looking at. So, if you compute that into the model today, PMS should be selling for a region of about N360 to N400,” he said.
But NNPCL, which was inaugurated as a limited liability entity in July last, lamented in February that it has been running at loss due to subsidy payments, which it said gulps more than N400 billion monthly. The NNPCL Group Chief Executive, Mele Kyari, said the payments, which cover 66 million liters per day at the cost of N202 per liter, are being made by NNPCL even though there is provision for that in the Budget.
The CEO said the payments are impacting the company’s financial flow, scuttling its objective, which is to make profit as a private entity.
The Nigerian government has been looking for ways to break away from the shackles of the fuel subsidy, which gulps significant percent of the country’s budget each year. Ahmed said in January that the fuel subsidy regime plays a very significant contributory role in revenue loss that has forced Nigeria to borrow. She had described Nigeria’s situation of borrowing to pay subsidy as “double tragedy.”
Both the World Bank and the International Monetary Fund (IMF) have repeatedly advised Nigeria to remove the fuel subsidy and channel the fund to the development of the nation’s economy, giving needed attention to education and health sectors.
However, lack of political will – buoyed by the government’s failure to address the potential economic hardship that will result from the subsidy removal, has held the federal government back.
With the Nigerian Labour Congress (NLC) sounding warning of nationwide industrial action if the subsidy is removed without adequate provisions to cushion the resulting effects, the Muhammadu Buhari’s administration had chosen to bequeath the responsibility to the incoming government.
The federal government is understood to be counting on Dangote Refinery, which was expected to begin operation mid-last year, to boost the quantity of locally refined PMS, significantly reducing Nigeria’s dependence on importation and saving the country its much needed forex.
Nigeria’s lack of functioning refineries sits at the center of its petroleum crisis – from fuel subsidy payment to fuel scarcity, which leaves the Nigerian public at the mercy of petroleum marketers every given time. Although the federal government has been working to rehabilitate dormant Warri, Port Harcourt and Kaduna refineries, it doesn’t look like they’re going to be ready any time soon.
Osifo said that functional local refineries will make fuel affordable and also create jobs for Nigerians, urging the government to increase the pace of the rehabilitation exercise.
“While maintaining our support for the full deregulation of the sector and the significant milestone achieved in this regard, we counsel that efforts be made to increase the pace of the current rehabilitation exercise of refineries and get them back on track in due time,” he said.
He added that the incoming administration must make palliatives available to Nigerians to mitigate the impact of the removal of petroleum subsidy.
Ahmed said last year that the federal government plans to introduce a transport subsidy to ameliorate the economic impact of the fuel subsidy removal on the Nigerian people.