The recent plummet of the Naira has significantly disrupted the petroleum supply chain, jeopardizing the anticipated benefits following the federal government’s removal of the petrol subsidy. There appears to be a discrepancy between oil marketers and government officials regarding the actual landing cost of Petroleum Motor Spirit (PMS) and the impact of Nigeria’s fluctuating currency on product importation.
Currently, the landing cost of PMS, commonly referred to as petrol, is estimated to average N1,009 per liter, based on the current exchange rate of N1,500 per dollar, a stark increase from N720 per liter in October 2023. Billy Gillis-Harry, President of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), has indicated that such figures could be contentious due to additional costs like insurance, port charges, and vessel hire.
Reports have also emerged suggesting a monthly petrol subsidy expenditure of about N907.5 billion by the country, as the foreign exchange crisis escalates the fuel’s actual cost to N1,203 per liter, hinting at a subsidy resurgence. However, an insider from the Nigerian National Petroleum Company Limited (NNPCL) refutes these claims, asserting that the subsidy era has ended and emphasizing the NNPCL’s mandate under the Petroleum Industry Act (PIA) to ensure energy security.
Mele Kyari, the group CEO of NNPC Limited, previously disclosed a monthly subsidy expenditure of over N400 billion on petrol. Dr. Muda Yusuf, CEO of the Center For The Promotion Of Private Enterprises (CPPE), commented on the currency depreciation’s partial erosion of subsidy savings, noting the inherent increase in subsidy due to fixed pump prices amidst rising landing costs.
The International Monetary Fund (IMF) recently suggested that the Nigerian government has indirectly resumed petrol subsidy payments, advising President Bola Tinubu to cease subsidy payments entirely to reallocate funds for government operations.
In response to the IMF’s stance, some groups and individuals have criticized its recommendations as detrimental to the masses, urging the Nigerian government to consider local solutions for economic improvement. Minister of Information and National Orientation, Mohammed Idris, highlighted a 50% reduction in petrol importation since the subsidy withdrawal and reported a significant increase in oil production from the second to the fourth quarter of 2023.
President Tinubu, in his address at the 7th Nigerian International Energy Summit, reaffirmed the subsidy removal decision as crucial for securing Nigeria’s energy future and enhancing economic growth. He emphasized the redirection of formerly allocated subsidy funds towards developing energy and social infrastructure.
PETROAN advocates for leveraging Nigeria’s vast gas reserves as a solution to the current challenges, emphasizing the potential of gas to transform the energy sector and alleviate the current supply chain issues.
