Fuel subsidy removal saves treasury N400b in 4 weeks
By Jeph Ajobaju, Chief Copy Editor
Abuja now saves N100 billion per week upon fuel subsidy removal, with the amount totalling at least N400 billion since the implementation began on May 31, two days after President Bola Tinubu made the pronouncement.
Oil marketers who calculated the sums said pump price, which currently costs between N488 and N600 per litre, may rise in July, going by the recent floating of the naira against the United States dollar.
The Central Bank of Nigeria (CBN) unified the naira exchange rates into the Investors & Exporters (I&E) Window on June 14, allowing market forces to determine the rate.
Oil downstream operators said based on the funds previously spent on subsidy, as disclosed by the Nigerian National Petroleum Company (NNPC), the treasury has saved hundreds of billions naira since the scam was stopped.
“Right now they [the government] are making money. At least with this removal of subsidy, the government has racked in hundreds of billions, whether in naira or dollars.
“This is because every month we knew how much they lost before,” Independent Petroleum Marketers Association of Nigeria (IPMAN) National President, Chinedu Okonkwo, told The PUNCH.
Okonkwo said the NNPC had disclosed to marketers how much it was spending on subsidy monthly, referring to the comments by NNPC Group Chief Executive Officer, Mele Kyari, at a meeting with oil sector operators in February.
“Today, by law and the provisions of the Appropriation Act, there is a subsidy on the supply of petroleum products, particularly PMS imports into our country. In current data terms, three days ago, the landing cost was around N315/litre,” Kyari said at the meeting.
“Our customers are here; we are transferring to each of them at N113/litre. That means there is a difference of close to N202 for every litre of PMS we import into this country.
“In computation, N202 multiplied by 66.5 million litres, multiplied by 30 will give you over N400 billion of subsidy every month.”
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IPMAN planning fuel imports
Okonkwo disclosed IPMAN is finding ways to import fuel now that the market is deregulated, according to The PUNCH.
“We are holding meetings with a lot of people who are interested in commencing PMS imports. We are not resting on our oars about this,” he said.
He explained pump price will rise and fall in response to foreign exchange (forex) rate fluctuations, and subsidy removal will not lead to continuous price increases.
“When there is deregulation and no subsidy, the price of petrol would either go up or come down. If you want to profiteer, those who bring in and sell at cheaper rates would put you out of business,” Okonkwo added.
“So market fundamentals will determine the pricing and capping. Therefore the floating of the naira at this time that Nigeria is beginning to make savings is not going to be a fixed thing.
“The exchange rate will also move up or down depending on how we manage our crude oil, which is our [main] foreign exchange earner. By the time we begin to meet our OPEC quota and other areas of generating foreign exchange, the naira will begin to firm up.
“And this will result in cheaper fuel. So we should not be thinking that the cost of fuel will continue to rise. The floating of the naira is good because at the previous level, you only accessed the dollar at the official rate based on who you know.”
Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) President, Billy Gillis-Harry, said the cost of petrol will respond to the exchange rate as the product will rise of drop in price based on current forex rate.
“So long as the exchange rate is high, the cost of petrol will be high. But these are early days and the expectation with the President Bola Tinubu-led government is that the exchange rate will be getting lower. So we will get there,” he enthused.
“PETROAN is already working on the import licence approval for petrol, because it has to be approved before you can import. We are doing this, while we still negotiate with the government on the process of getting the refineries to work.”