… Downstream Petroleum stakeholders insist that there is still subsidy on petrol
The Nigerian National Petroleum Company (NNPC) Ltd. assures the public that there is no imminent increase in the cost of Premium Motor Spirit (PMS), commonly known as petrol.
NNPC Ltd. urges Nigerians to disregard unfounded rumours and assures them that there are no plans for an upward review of the PMS price.
A statement signed by Olufemi O. Soneye, Chief Corporate Communications Officer, NNPC Limited, advised motorists nationwide against engaging in panic buying, as there is presently ample availability of PMS across the country.
The NNPC Limited statement must have been prompted by the controversy between it and the Independent Petroleum Marketers of Nigeria (IPMAN) over the removal of subsidy on petrol.
The Nigerian National Petroleum Company Limited and fuel marketers under the aegis of the Independent Petroleum Marketers Association of Nigeria, on Tuesday, clashed again over the removal of subsidy on petrol.
This came against the backdrop of the depreciation of the naira against the United States dollar at both the official Investors and exporters Window and the parallel market.
On Tuesday, the local currency closed at 998/dollar at the official market, while it traded at 1,225/dollar at the black market.
On the back of the falling naira rate, economists and oil marketers said PMS subsidy was increasing in recent times, but the NNPC quickly countered these positions and declared that it was recovering its full cost on the importation of Premium Motor Spirit, popularly called petrol, countering the positions of
The Chief Executive Officer, of Financial Derivatives Company, Bismarck Rewane, during a live television program on ChannelsTV on Sunday, explained that fuel subsidy was not removed but reduced.
Similarly, oil marketers told our correspondent on Tuesday that subsidy on petrol was increasing considering the crash of the naira against the United States dollar and the cost of crude oil, stressing that PMS should sell for N1,200/litre in a free market.
Petrol, which is solely imported into Nigeria by the NNPCL, currently sells for between N617/litre to N660/litre, depending on the location of purchase in Nigeria.
According to a report by the Punch Newspaper, another prominent Nigerian and Chief Executive Officer, Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said there was partial subsidy on petrol, but noted that the commodity was subsidised by the government for political, social and economic reasons.
Full cost recovery
But when contacted, the Chief Corporate Communications Officer, NNPCL, Olufemi Soneye, described the positions of the economists and marketers as assumptions and insisted that the Federal Government had stopped subsidy on petrol.
President Bola Tinubu during his inaugural speech on May 29, 2023, declared that subsidy on petrol was gone, a declaration that was effectively implemented the next day by NNPCL.
Before Tinubu’s declaration, the pump price of petrol was below N190/litre. Still, it jumped to over N500/litre after the President’s statement and moved up again to over N600/litre a few weeks later.
Asked to state if the NNPCL, Nigeria’s sole importer of petrol, subsidized the commodity as dealers and experts posited, the oil firm’s CCCO replied, “We prioritise our time on substantive matters rather than responding to assumptions.
“At NNPC Ltd, we prioritise national development through energy security and sustainable growth. We reiterate that the Nigerian government does not pay subsidy on fuel; we recover full costs from our imported products.
“As a global energy company, our focus remains on fostering a vibrant and energy-secure Nigeria.”
‘Subsidy reduced’
Rewane had earlier explained that subsidy on petrol was reduced and not removed, while featuring on a live television programme on Sunday evening, he further highlighted the effects of the reduction in fuel subsidy and how it affected salary earners in Nigeria.
He said, “At the inauguration, it was said that (fuel) subsidy was gone but subsidy was reduced.”
Buttressing his position, he explained, “There is the convergence of exchange rates and reducing the windows into one. The consequence of that is that money has been transferred from consumers to the government.
“Subsidies are reversed taxes; if you reduce them, you increase the people’s taxes and reduce their income. What has happened is that government revenue has increased by 44 percent between May and June (2023). Money has been transferred to the government but what is the government doing with it?
“The consumers, on the other hand, had a minimum wage, which in dollar terms was $40 in 2002. In 2019, it was about $70, but it has now been reduced to $24.”
Marketers project N1,200/litre
The National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria, Chief Ukadike Chinedu, stated that subsidy on petrol was rising and that the cost of the commodity should be around N1,200/litre in a free market.
“To be pragmatic in this analysis let’s consider the cost of petrol today in the United States. For premium petrol, it is $2.99, while super petrol sells for $3.15 or $3.10 depending on the part of the country where you are making the purchase.
“Now, $3 in Nigeria is over N3,000, because a dollar in the parallel market is over N1,000. You can also see the cost of diesel, which is over N1,000/litre, and it is important to state that petrol is usually higher in price than diesel in a free market.
“So if you consider the cost of diesel, dollar and other international factors, the price of petrol in Nigeria should be around N1,200/litre, but the government is subsidising it, which to an extent is understandable,” he stated.
Ukadike noted that he had earlier explained that the government was implementing quasi-subsidy, which means that “the Federal Government, instead of taking out the subsidy by 100 percent, decides to take out about 50 percent.”
The IPMAN official, however, expressed optimism again that the cost of refined petroleum products would reduce as soon as the Port Harcourt and Dangote refineries start producing the commodities.
