President Bola Tinubu’s administration has spent N15. 096 trillion on petrol subsidy in the last 14 months, according to BusinessDay’s calculations.
The value of the subsidy expenditure under Tinubu was obtained from the National Bureau of Statistics (NBS) data and information from petroleum marketers.
According to the NBS, Nigeria imports between 1.4 billion litres and 2.5 billion litres per month, indicating an average of 1.95 billion litres per month. In 14 months (June 2023-July 2024), the country has consumed 27.3 billion litres.
On the other hand, independent marketers say the landing cost of petrol and other logistics costs stand at N1,203 per litre. The NNPC Retail sells petrol at N650 per litre at its stations, leading to a differential of N553 for each litre of petrol.
With the N553 differential and 27.3 billion litres consumed in 14 months, the amount likely to have been spent over the period by the Tinubu administration is N15.097 trillion.
Kelvin Ayebaefie Emmanuel, CEO of Dairy Hills, said Nigeria must first of all be honest with the number of litres of petrol consumed in the country.
“The first step to address the cost of under-recovery on the premium motor spirit (PMS) subsidy is finding the actual daily consumption.
“The other two major factors that have gone into the re-introduction of under-recovery is the price of crude oil and the exchange rate. The only way to achieve non-payment is to have the Naira to USD pair at 750 and Brent prices at $75 per barrel,” he said.
“This is the reason why the government needs to adjust the domestic crude oil supply obligations and guarantee domestic refineries the feedstock they require to backwardly integrate production.”
President Bola Tinubu in his inauguration speech on May 29, 2023, said petrol subsidy was gone. However, it has grown bigger than the amount being paid before he came to power.
Nigeria’s former President Muhammadu Buhari spent N10.7 trillion on petrol subsidies between 2016 and the first six months of 2023.
In one year, however, Tinubu’s petrol subsidy expenditure has eclipsed that. Analysts attribute this to the naira slump after the foreign exchange liberalisation in 2023.
Naira has lost more than 60 percent value since it was liberalised by the current administration, analysts say. A dollar exchanges for N1,592.06 on Tuesday as against N740 on June1, 2023.
A week before the 2023 presidential election, which led to the new administration, Mele Kyari, group CEO of Nigerian National Petroleum Company (NNPC) Limited, revealed that the country was spending more than N400 billion monthly on fuel subsidies.
But on Monday, in a viral video, Kyari told the press that the state-owned company was not paying fuel subsidies.
“I told you there is no subsidy whatsoever. We are recovering our full costs from the products that we import.
“We understand why the marketers are unable to import. We hope that they do this very quickly and these are some of the interventions the government is doing. There is no subsidy,” he said.
BusinessDay’s analysis, however, has revealed that while the retail price of petrol stands between N650 and N750 across the country, the landing cost of petrol per litre is over N1,200 as of Monday, August 19, 2024.
“The government has seen the analysis and has now recognised the subsidy is back and bigger,” said Jide Pratt, chief operating officer of AIONA and Country Manager of TradeGrid.
Pratt said that the subsidy levels before Tinubu’s government were circa N50/N60 naira per litre using the gasoline index and the exchange rate.
He said: “A few months ago it was in the N200 per litre range. The exchange rate has been all over the place and this affects the landing cost of the sole importer of PMS, which is the NNPC.
“It was hard to justify how NNPC Retail had an N42 price advantage over other marketers who buy from her. It was very odd to justify in a petroleum market with slim margins.
“But I guess the chicken has come home to roost. The queues we keep witnessing albeit now longer and more frequent are a testament to maybe struggles with payment as and when due.”
According to a recent report by The Cable, President Bola Tinubu has approved a request by the NNPC Ltd to utilise the 2023 final dividends due the federation to pay for petrol subsidy.
The report showed that the president also approved the suspension of the payment of 2024 interim dividends to the federation in order to augment NNPC’s cash flow, according to presidency sources.
In addition, the national oil company told the president it will be unable to remit taxes and royalties to the federation account for now because of the subsidy payments, which it termed ‘subsidy shortfall/FX differential’.
Despite the Petroleum Industry Act of 2021 and the deregulation of the downstream sector, which permits licensed private oil marketers to import petrol, the state-owned oil company remains the only importer in Nigeria.
However, private marketers have struggled to access the foreign currency needed for petrol imports, forcing them to rely on the state-owned oil company for supply.
Peoplesmind
