By Oluwatosin Maliki
The analysis of oil marketers and the sector indicates that the Federal Government might be left with no choice than to return to spending N1.68trn on fuel subsidy for Premium Motor Spirit, popularly called petrol, from September to December this year.
This was disclosed by PMS dealers on Thursday that the pump price of petrol should be between N890 to N900/litre as a result of the fall of the naira against the United States dollar and the jump in the price of crude in the international market.
Currently, petrol sells for between N598 and N617/litre depending on the location of purchase, increasing suspicion that the commodity is being subsidised by the Federal Government.
Although, the Federal government and the NNPCL have not officially affirmed the reintroduction of subsidy on petrol.
Recall, that during the inaugural address of President Bola Tinubu on May 29, he announced the end of the subsidy regime.
The NNPCL is the sole importer of PMS. Other marketers stopped PMS imports due to their inability to access foreign exchange.The government subsidises PMS through the Nigerian National Petroleum Company Limited.
Subsequently, the end of fuel subsidy gave rise to the hike in the pump price of petrol from about N198/litre in May to the current rate of N617/litre. Also, with the plummet of the naira coupled with the increase in crude oil price have continued to mount pressure on the cost of PMS.
Dealers in the downstream oil sector explained that the cost of crude oil and the exchange rate of the naira-dollar accounted for over 80 per cent of the cost of PMS.
As a result of the exchange rate, Brent crude, the global benchmark for oil, rose to about $95/barrel on Thursday. It had peaked to $97/barrel the preceding day, which was the highest figure in 2023.
However, in the beginning of the year oil was about $82/barrel, dipped to $70/barrel in June, but traded above $94/barrel in the past week.
It was gathered that on Thursday, the naira continued its downward trend after exchanging to the dollar at 980 on the parallel market on Wednesday.
Subsequently, a week earlier, the naira was exchanged to the dollar at 950/$.
However, on the FMDQ at the Investor & Exporter forex window, the naira appreciated slightly after closing at 770.71/$ on Wednesday from 776.76/$ on Tuesday.
According to oil marketers, the forex crisis and the recent rise in crude price have made it impossible for petrol price to still remain at N617/litre. Furthermore, insisting that the government had quietly reintroduced fuel subsidy.
According to a media report on Thursday, it indicated the Federal Government paid N169.4bn subsidy in August, 2023.
Quoting a Federal Account Allocation Committee document, the report said the Nigerian Liquefied Natural Gas paid $275m as dividends to Nigeria via NNPCL.
NNPCL, according to the report, used $220m (N169.4bn at N770/$) out of the $275m to pay for the PMS subsidy in the review month.
The National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria, Chief Chinedu Ukadike, stated, “I told you earlier that there is no way that the government will sustain the price of petrol at N617/litre without paying subsidy on it, going by the continued fall of the naira”.
He added, “The dollar is almost N990 at the parallel market currently, and you can see the effect of this on the pump price of diesel. Diesel is close to N1,000/litre, so the retail price of PMS should be around N890 to N900/litre”.
In addition, he said, “therefore, it is better the government assists the masses by paying subsidy. From our records, in the United States, the super product or petrol is sold around $3.9, which is close to about N3,000/litre”.
“The premium product is sold at about $2.89, which is over N2,000/litre. And if you check in other African countries you will find out that the product is being sold at between N1,200 and N1,500. But going by the forex rate in Nigeria, it should be around N900/litre.”
The National Secretary, IPMAN, Chief John Kekeocha, while commenting on the government’s decision to reportedly reintroduce fuel subsidy, he said it was obvious the price of petrol was now higher than N617/litre.
Furthermore, he commended the government for considering the plights of its citizens, but stressed that the government should come out clean on subsidy.
“The government must come out clean on subsidy. We know it is not possible to be running full deregulation at the current price of petrol. However, it is commendable that they are considering the plights of the masses,” the IPMAN official stated.
Meanwhile, the Chairman of Satellite Depot, IPMAN, Akin Akinrinade, said a rise in the pump price of diesel, a deregulated product, should mean a corresponding rise in the pump price of petrol which was also recently deregulated with the official ending of the subsidy regime in June.
He said, “Ex-depot price of diesel is around N989 per litre while at the pump it is now selling at N1000 per litre. Ex-depot price of petrol at DAPPMAN depots is between N572-N575 per litre, while NNPCL depots sell at N556.5 per litre.