Despite recent claims by the Nigerian government regarding the removal of subsidies on Premium Motor Spirit (PMS), commonly known as petrol, Nigeria still boasts the lowest petrol prices in West Africa. This discrepancy, highlighted by data from Global Petrol Prices and calculations by the Major Energy Marketers Association of Nigeria using an exchange rate of N1,555 per dollar, suggests that the subsidy on petrol has been reduced rather than completely eliminated.
The current price of petrol in Nigeria is approximately $0.39 per litre, translating to about N599 per litre. This price significantly undercuts that of Liberia, the next cheapest in the region, where petrol costs roughly N1,570.5 ($1.01) per litre. The substantial price gap between Nigeria and its West African neighbors has widened compared to nine months ago, potentially incentivizing the smuggling of petrol across Nigerian borders due to the lucrative arbitrage opportunities it presents.
Industry analysts have raised concerns over a lack of transparency in the sector, warning that the current situation could lead to increased smuggling, theft, and vandalism of pipelines. Jide Pratt, country manager of Trade Grid, commented on the need for greater openness in the market, particularly criticizing the Nigerian National Petroleum Company (NNPC) Limited for potentially exploiting the price differential.
The NNPC, which transitioned from a corporation to a company in July 2022 following the Petroleum Industry Act (PIA) 2021, was expected to operate independently of government influence and without state funding. Despite this, the Federal Government, represented by the Ministry of Finance Incorporated and the Ministry of Petroleum Incorporated, holds all shares in the NNPCL, raising questions about its operational autonomy.
The monopoly held by the NNPCL on petrol imports into Nigeria has been identified as a significant factor contributing to the persistence of fuel subsidies. Eze Odiri, a public sector consultant, highlighted the challenges posed by government ownership and the recent policy changes concerning fuel subsidies and the convergence of Naira exchange rates.
Kelvin Emmanuel, CEO of Dairy Hills Limited, also confirmed that the government continues to subsidize petrol, leading to ongoing issues with smuggling. This situation is further compounded by the substantial economic losses due to oil theft, as reported by Ogbonnaya Orji, Executive Secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI). Between 2017 and 2021, Nigeria experienced over 7,000 incidents of pipeline vandalism, resulting in the theft of approximately 208.639 million barrels of crude oil, valued at billions of dollars.
As the Nigerian government grapples with these complex challenges, the need for comprehensive reforms and greater transparency in the petroleum sector becomes increasingly evident.