In a recent development, oil marketers have strongly contradicted the stance of the Federal Government, insisting that the current price of Premium Motor Spirit (PMS), commonly known as petrol, should not be lower than N800 per liter in the absence of a subsidy on the product.
Currently, petrol is being sold at prices ranging from N580 to N617 per liter, depending on the location of purchase. The Nigerian National Petroleum Company Limited (NNPCL), representing the Federal Government, has denied reintroducing a subsidy on PMS.
Mele Kyari, the Group Chief Executive Officer of NNPCL, reiterated this stance by stating that there is no subsidy on petrol. He explained that they are recovering their full costs from imported products and selling to the market.
However, oil marketers have persistently claimed that fuel subsidy has returned, indicating that the landing cost of petrol was at N720 per liter as of last week.
Critics argue that when the government removed the PMS subsidy, the exchange rate was much lower (N700 per dollar), and now, with a dollar surpassing N1,000, the government is still providing petrol at almost the same rate, which implies hidden subsidies. This situation raises concerns among oil marketers who believe that the government is expending significant funds to maintain current prices.
The Independent Petroleum Marketers Association of Nigeria’s National Secretary, Chief John Kekeocha, expressed frustration over what he sees as misinformation from the government and the unexpected reintroduction of subsidies. He stressed that without the government addressing the challenges related to forex and the high cost of importing petroleum products, the cost of petrol could escalate to N800 per liter or even higher.
Kekeocha emphasized that making the refineries operational is crucial to reducing the reliance on imports and potentially lowering local fuel prices. He argued that the high cost of fuel and diesel is primarily due to importation and the current forex rate, which is beyond the government’s control.
Furthermore, Kekeocha warned about the implications of these developments, particularly for independent marketers who operate the majority of filling stations across the country. He stated that the high cost of diesel and the inability to import are leading to a reduction in the number of functional filling stations, which could result in fuel scarcity, especially in areas without major operators with tank farms.
Benneth Korie, the National President of the Natural Oil and Gas Suppliers Association of Nigeria, echoed the concerns, emphasizing that fuel subsidy’s gradual return is leading to filling stations closing down.
These concerns also extend to the cost of diesel, which is impacting businesses in the downstream oil sector. The stakeholders in the sector have called for urgent government intervention, including declaring a state of emergency on refineries and providing palliatives to marketers for diesel importation until the refineries become operational.
It is worth noting that one private marketer, PETROCAM, recently imported petrol but could not sell it due to the reintroduction of subsidy on PMS and the government’s reluctance to increase pump prices. Other marketers have been unable to influence the Nigerian National Petroleum Company’s pricing decisions, which has led to the current situation where prices are lower than the landing cost, indicating a subsidy.
In the midst of these developments, the Nigerian Midstream and Downstream Petroleum Regulatory Authority disclosed that fuel subsidy is consuming approximately N4.8 trillion annually. CEO Farouk Ahmed stated that this subsidy has strained government finances and impeded its ability to meet obligations.
Despite the historical presence of fuel subsidies in Nigeria since the 1970s, it is becoming increasingly challenging for the government to sustain this practice. Critics argue that immediate action is needed to address the complex issues in the downstream oil sector and avoid the potential consequences of rising fuel prices and product shortages.
