Fuel subsidy removal likely to cost consumers N8tr if refineries not fixed
By Jeph Ajobaju, Chief Copy Editor
Once Abuja removes subsidy, consumers may pay about N8.4 trillion for petrol between July and December 2023, about 250 per cent greater than N2.4 trillion they would have spent with subsidy intact.
Oil marketers said without subsidy the average cost of petrol could rise to about N700 per litre from July, meaning full deregulation could raise fuel expenditure to N6 trillion in the six-month period.
Nigerian National Petroleum Company (NNPC) Chief Executive Officer Mele Kyari in February said more than 66 million litres of petrol was supplied daily to the domestic market by the NNPC.
With a projected average cost of N700 per litre without subsidy, Nigerians would pay about N46.2 billion daily for petrol, which translates to about N1.4 trillion monthly and N8.4 trillion in the six months from July to December 2023.
“If the refineries are not working and we are going to depend on imports, then the price of petrol may rise even above the N700 or N750 that is being projected,” warned Billy Gillis-Harry, President of Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), per reporting by The PUNCH.
“This is because it is going to depend on the dollar rate and crude oil cost. When you check the landing cost, logistics, overhead, profit, etc, you might be looking at about N800, though the average is pegged at N700.
“And that is if we continue to depend on imports. Now, this calculation is based on when we get the product at the approved Central Bank of Nigeria dollar rate, and not at the over N740/$ black market price.
“If the dollar is accessed at the black market rate, then you can double that N700/litre average price once subsidy is removed. So you should be looking at between N1,400 to N1,700/litre. This is why we must get our refineries working.”
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Fixing refineries before subsidy removal
Mohammed Shuaibu, Independent Petroleum Marketers Association of Nigeria (IPMAN) Abuja branch Secretary, said although it is vital to remove subsidy, doing so without functional refineries would definitely raise fuel price, per The PUNCH.
“Maybe the incoming government will have a proper way of stopping fuel subsidy. How can you stop subsidy when your refineries are not working? By the time they remove subsidy and the refineries are not working, Nigerians should be ready to buy fuel at N700 or N800/litre,” he warned.
“The sole importer of this product is NNPC and the demand is high. The price in some parts of the East currently is above N300/litre. By the time the subsidy is removed and there is full deregulation, the landing cost alone could hit over N400 and after all other things are added, Nigerians should be ready to pay about N700/litre.”
The National Economic Council (NEC) in April asked the federal government to suspend the June deadline for subsidy removal pending the review of plans to provide palliatives for the populace.
Finance Minister Zainab Ahmed disclosed this after the valedictory NEC meeting in Abuja.
She said there may be need to send a supplementary budget to the National Assembly (NASS) if the incoming administration aligns with the decision to suspend subsidy removal.
But news filtered in early May the federal government would proceed with subsidy removal at the end of June.
According to the report, the Ministry of Finance, Budget and National Planning insisted there is “no change in the overall policy direction regarding the petrol subsidy envisaged by June 2023.”
Ahmed’s Media Adviser Yunusa Abdullahi was quoted as explaining the NEC decided the Subsidy Removal Committee needed to be expanded to include teams from the incoming administration and Governors.
“By the principles and letters of the 2023 Appropriation Act and the PIA laws, there is no provision for subsidy after June 2023,” Abdullahi insisted.
He said some members of the incoming government were “brought into the National Economic Council meeting so as to consolidate on that decision of fuel subsidy removal.”