FG spends N1.243tn monthly as fuel subsidy hits N600/litre – Operators

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The amount spent as subsidy by the Federal Government on every litre of Premium Motor Spirit, popularly called petrol, consumed in Nigeria is currently above N600, oil sector operators stated on Sunday.

Also, the latest PMS evacuation data obtained from the Nigerian National Petroleum Company Limited on Sunday showed that the year-to-date daily consumption of petrol in Nigeria was 66.8 million litres.

Going by the above figure from the NNPC, it, therefore, implies that the Federal Government spends about N40.1bn daily when subsidising every litre of petrol consumed in Nigeria by at least N600. This also means  that the government is spending about N1.243tn on fuel subsidy every month

Oil marketers told our correspondent that the cost of petrol (if not subsidised as done in Nigeria) was often higher than the cost of Automotive Gas Oil, popularly known as diesel

They said diesel price was currently between N800 and N850/litre, while the approved subsidised pump price of petrol had remained at N165/litre. Diesel is not subsidised.

Their position had earlier been confirmed severally by other operators in the oil sector, including NNPC’s Group Managing Director, Mele Kyari.

Based on this, it implies that the Federal Government through NNPC currently spends nothing less than N600 as subsidy on every litre of petrol consumed across the country.

“The cost of petrol in Nigeria is about the cheapest in the world. And this is because of subsidy. The subsidy is not small, it is so great,” the Deputy National President, Independent Petroleum Marketers Association of Nigeria, Zarma Mustapha, told our correspondent.

He added, “Diesel is going for about N850/litre currently because there is no subsidy on it. And this means petrol price should be almost same price if not for subsidy.”

Zarma explained that this humungous subsidy spending by the government through NNPC was unsustainable, stressing that the crisis in the downstream oil sector was now affecting retail outlets seriously.

He said, “Many independent marketers who were selling at the N165/litre price have closed shop over time because it is not sustainable and is killing our businesses.

“So with the current dynamics going on in the industry, it is not realistic to sell PMS at N165/litre. I want to tell you one thing, in the whole world there is no place that petrol is being sold at the price we are selling it in Nigeria.”

NNPC has been the sole importer of petrol into Nigeria for several years. The oil firm has continued to shoulder the burden of subsidy over these years, a development that has been making it unable to make monthly remittances to the Federation Accounts Allocation Committee.

Also speaking on the burden of fuel subsidy on the economy, the President, Petroleum Products Retail Outlets Owners Association of Nigeria, Billy Gillis-Harry, told our correspondent that the subsidy regime was no longer sustainable.

“We have said it times without number that this subsidy regime is no longer sustainable, as the global crisis in the oil sector coupled with the crash of the naira against the dollar have made it tough for Nigeria,” he said.

The National President, Natural Oil and Gas Suppliers Association, Bennett Korie, had told our correspondent that the current cost of petrol could make one to run away if told.

“You can’t buy petrol at a high price and sell this low. Crude oil is about $130/barrel, the cost of fuel, if you hear it, you will run away; but you are selling at N165/litre. So definitely you don’t expect money to remain for government to run other activities when it spends heavily on subsidy,” he stated.

In June last year, the NNPC helmsman had explained that the cost of petrol should be more than the N280/litre price of diesel as at that time.

Kyari had stated that organised smuggling was the reason for the huge petrol consumption volume in Nigeria, stressing that the low petrol price in the country was also an incentive for this.

The NNPC boss had said, “Today we are paying N162/litre (for petrol). I am sure many people buy AGO (diesel) in the market and it is selling at N280/litre in the market today.

“So (there is) nowhere in the world diesel sells more expensive than PMS. That means that the price of petrol anywhere in the world, assuming you are going to sell it at the market, you are going to sell it above that price you have seen.”

Meanwhile, the IPMAN deputy president urged the government to hasten up the repairs of Nigeria’s refineries, as this would serve as a major remedy to the woes besetting the oil sector.

“If we have refining capacity, the government would have found a way of cushioning the effect of the rise in prices. However, since we don’t have refining capacity and we use the dollar to purchase products abroad, we will have no control over prices,” Zarma stated.

Fuel subsidy removal’ll be very harsh now, experts say

But despite calls for the deregulation of PMS by operators and some international financial organisations, a renowned energy expert and Technical Director at Template Design Limited, Baka Zaka, kicked against the push.

Zaka argued that the widespread poverty in Nigeria would not support an outright halt in petrol subsidy, no matter the positions of oil marketers and global lenders such as the World Bank, International Monetary Fund, Organisation of Petroleum Exporting Countries, among others.

He said, “Those calling for subsidy removal don’t know what economic growth is all about, because you will, first of all, have economic growth before even economic development.

“Let me give you my reasons for saying this. We already know that diesel has been deregulated and we can all see the consequences in all the sectors, whether strategic domestic, commercial or industrial sector.

“We have seen how companies are shutting down, how banks are closing around 1 or 2pm in parts of the country, while some don’t even open on some days just because they cannot afford the cost of diesel and can’t break even.”

Zaka added, “And as I’m speaking to you now, Company Income Tax will go down this year. Maybe that is when people will know the consequences of deregulation. And that is just on diesel, I’ve not talked about kerosene and aviation fuel.

“So for people canvassing PMS deregulation, do they know that the minimum wage in this country today is around $50, which is about N30,000? Are you saying that a country where the minimum wage is about $50/month is where you want to price of PMS to approach that of diesel?

“If PMS price approaches that of diesel, it means sachet water would sell for N200 to N200. Is that the kind of economy we want?”

On his part, a former President, Association of National Accountants of Nigeria, Dr. Sam Nzekwe, stressed that it would be very harsh at the moment to completely halt fuel subsidy.

“Subsidy removal should be gradual, but most importantly is the call for our refineries to work so that we can stop spending the bulk of our foreign exchange on petroleum products’ imports,” he stated.


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