Dollar Scarcity: Petrol Subsidy Now N907.5Billion Monthly

by J.J Olawuyi

• The real pump price for a liter is N1,202.7.

• As deregulation fails, more than 90 licensed marketers give up on importing gasoline.

• As diesel costs N1,400 per litre, truck drivers may decide to stop operating.

• Price control is inconvenient Dangote and several nearby refineries

Despite government claims, Nigeria is spending roughly N907.5 billion.

monthly premium motor spirit (PMS) subsidy, sometimes known as gasoline, as the

The actual cost of a litre of fuel has increased to N1,202.7 due to the naira’s depreciation.

Nearly nine months after President Bola Tinubu proclaimed the liberalization of the petroleum industry’s downstream sector, over 90 marketers with licenses to import petroleum products into the nation have been unable to do so because to unresolved price differentials.

Given these worries, the nation’s distributor of petroleum products, the Nigerian Association of Road Transport Owners (NARTO), informed The

The Guardian reported yesterday that they had decided to abandon their plans in order to seek twice the current transportation allowance, which is often left up to market forces.

According to NARTO, the cost of diesel from Lagos to Abuja has increased to N1.4 million as the price of the fuel rises to almost N1,400 per litre.

It was midyear last year, N600,000.

There are signs that the government’s price control despite deregulation will continue even though the Port-Harcourt Refinery’s restart has not yet materialized.

irritate refineries like Dangote Refinery that are currently dependent on imported crude oil for their operations.

In the fifth week of the year, PMS Eurobob shipped to West Africa was $820.27 a tonne at a crude oil price of about $78 per barrel. Since there are 1000 liters in every tonne, the landing price of gasoline in Nigeria is $0.8 per liter. Based on the official exchange rate of N1,503.4 to the dollar, a liter of PMS should cost N1,202.7 upon arrival. In the absence of marketers’ margin and additional transportation components, the Federal Government currently subsidises each liter of petrol by around N585.5.

The N585.5 per liter subsidy would be N29.28 billion per day and almost N907.5 billion monthly if the nation’s daily consumption decreased from roughly 65 million liters to about 50 million liters.

The current price range for gasoline in most West African nations is between N2,000 and N1,400. A liter of PMS cost N2,011 in Cameroon yesterday, while it cost N1,633 in the Benin Republic. It sold for N1,500 per liter in Ghana, whereas it cost N1,680 in Togo. In Burkina Faso, it was N2,042, while in Mali, it was N2,080.

Marketers who spoke yesterday claimed a crisis is approaching in the downstream sector of the petroleum industry, coinciding with the International Monetary Fund’s (IMF) request that Tinubu remove subsidies for gasoline and electricity. This request confirms The Guardian’s and stakeholders’ positions that the government is funding these subsidies. As there are no immediate intentions to raise fuel prices, Tinubu said in mid-August that the pump price will stay the same despite the downstream market’s liberalization.

In comparison to the $859.25 it traded around July, PMS was trading for $1,030.11 per metric tonne on the international market as of the last week of August.

The average pump price was raised to N617 per litre by NNPC. The price of the goods reached nearly twice its subsidized cost by the first week of February 2024, despite the fact that the price had dropped to $820 per ton due to the wild fall of the naira.

The only importer has been the Nigerian National Petroleum Company Limited (NNPCL), as there was no budgeted provision in the 2023 appropriation. NNPCL, which generates more than 80% of the foreign exchange, imports the goods at a favorable rate and sells them to other merchants.

The costs that the budgetary allotment did not cover are noted in NNPC’s books as under-recovery.

The majority of his licenced members, according to Abubakar Shettima, President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), are able to import and sell at the going rate.

He said that the government ought to level the playing field and supply foreign exchange at the same rate that the NNPC does.

Shettima declared, “Since we received licenses, we have not imported a single liter; only NNPC is importing.”

Farouk Ahmed, the CEO of the Nigerian Midstream Downstream Petroleum Regulatory Authority, stated in an announcement from last year that the federal government was looking at ways to address industry problems in a sustainable manner. He also gave 90 licenses to marketers so they could import goods.

In addition to the merchants’ concerns on the availability of foreign exchange to support their imports, NNPC has guaranteed supplies.

“As regulators, we still maintain that the market is accessible to all. All of the people who applied to more than 90 marketing companies have received licenses from us.

“We have provided them with all the necessary assistance to guarantee an uninterrupted flow of petroleum products throughout the nation,” Ahmed declared.

According to Othman Yusuf, President of NARTO, the environment is in danger and movement of petroleum products across the nation would be halted.

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