Petrol subsidy grows to N947.51b and may reach N6tr this year
By Jeph Ajobaju, Chief Copy Editor
Fuel subsidy grew to N947.51 billion in the first four months of 2022 (4M 2022) and
the Nigerian National Petroleum Company (NNPC) has informed the Federation Account Allocation Committee (FAAC) that it would deduct N874.5 billion for subsidy in May proceeds due for sharing at FAAC meeting in June.
The pump price of premium motor spirit (PMS) or refined petrol is subsidised by the NNPC which it describes as under-recovery/value shortfall, according to its latest figures.
The approved pump price is between N162 and N165 per litre but oil marketers argue the cost would be higher or about the same as the price of diesel if petrol was deregulated.
Products Retail Outlets Owners Association of Nigeria (PPROOAN) President Billy Gillis-Harry explained that the actual cost of petrol without subsidy is higher than that of diesel.
He said if not for subsidy, petrol would be selling between N550 and N600 per litre going by the international cost of crude and fluctuations in foreign exchange (forex).
The NNPC in its most recent presentation to the FAAC reiterated more deductions would be made from what would be shared by the three tiers of government in June.
“The value shortfall on the importation of PMS recovered from April 2022 proceeds is N271,125,127,487.58, while the outstanding balance carried forward is N371bn,” it said.
“The estimated value shortfall of N874,503,649,663.98bn (consisting of arrears of N371bn plus estimated April 2022 value shortfall of N503,313,767,828.14) is to be recovered from May 2022 proceed due for sharing at the June 2022 FAAC meeting.”
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Subsidy not sustainable
Latest figures The PUNCH obtained from the NNPC in Abuja show the amount spent on fuel subsidy grew from January to April this year.
- January – N210.38 billion
- February – N219.78 billion
- March – N245.77 billion
- April – N271.58 billion
- Total – N947.51 billion
“This is unsustainable. In just four months we’ve incurred this much as subsidy on petrol because of our continued dependence on petroleum products imports,” Independent Petroleum Marketers Association of Nigeria (IPMAN) National Public Relations Officer Ukadike Chinedu told The PUNCH.
“And this is because all our refineries are not yet working despite several promises by government that the plants will start production. The value of the naira is depreciating daily, so what do you expect?
“Nigeria will continue to subsidise petroleum products and that is static at the moment and based on this, our naira will continue to be devalued, because so much dollars are just being deployed in pursuing products.
“Fixing the refineries is supposed to be our priority considering the gains it would have on the economy and the country as a whole.
“The managers of this country should encourage modular refineries in Nigeria.
“Secondly, even small-scale refineries should be encouraged to come up to boost the moribund refineries we have. Nigeria can even build a brand new refinery from scratch, it will help us.”
Subsidy may rise to N6tr this year
Major Oil Marketers Association of Nigeria (MOMAN) Executive Secretary Clement Isong had previously warned that subsidy might hit N6 trillion in 2022.
“It is a function of how our exchange rate goes. It is a function of how the price of oil goes. If we are lucky and if things are on our side, then it (subsidy) might be less.
““But if things are not on our side, if you do the current calculation as of today, based on all the numbers today, if things do not improve, it can easily reach N6 trillion,” he said.
Former Association National Accountants of Nigeria (ANAN) President Sam Nzekwe insisted funds spent on petrol subsidy should have been used to tackle challenges in other sectors of the economy.
“This is the reason why we have been urging the government to fix our refineries and let us refine our crude here and save the forex being used in importing petrol. We can’t continue spending this much on petrol subsidy,” he said.
