FG Subsidising Petrol With N120bn Monthly-NNPC

The Federal Government is currently spending about N120bn monthly to subsidize Premium Motor Spirit popularly known as petrol.

The Group Managing Director, Nigerian National Petroleum Corporation, Mele Kyari, said this on Thursday at the weekly ministerial briefing at the Presidential Villa, Abuja.

He said while the actual cost of importation and handling charges amounts to N234 per litre, the government had been selling at N162 per litre, therefore, bearing the difference.

THE WHISTLER had exclusively reported that the push for the reintroduction of fuel subsidy by some stakeholders in the Nigerian economy particularly the Nigerian Labour Congress may cost the federation account about N1trn before the end of this year.

The Federal Government had in the 2021 budget abolished the payment of fuel subsidy as no provision was made for such expenditure.

As a result of the non provision of fuel subsidy in the 2021 budget, this Website had reported that the burden of the N1trn federation account remittance shortfall is being pushed to the NNPC in the form of under recovery that would arise as a result of the price differential between landing cost and pump price of petrol.

Since the deregulation of the downstream sector of the petroleum industry last year, which led to the removal of fuel subsidy, there had been a push by the Nigerian Labour Congress and other stakeholders for the reintroduction of fuel subsidy.

With the deregulation of the downstream sector, the price of petrol had rose from N121.50 to N123.50 per litre in June, to N140.80-N143.80 in July, N148-N150 in August, N158-N162 in September and N163 in November.

Since November last year, the price of Premium Motor Spirit popularly known as petrol had remained unchanged despite the increase in crude oil prices in the international market.

As of the time the fuel subsidy was removed in June last year, the price of crude oil was about $45 per barrel.

But as of Wednesday, the price of crude oil had hit a 13 month high of about $65 per barrel. This price is far higher than the 2021 Federal Government budget benchmark price of $40 per barrel.

What this means is that while expectations are high that there would be more revenue to be earned from crude oil sales by the NNPC for the government, the adverse effect would be on the imported price of crude oil.

And with the push for the reintroduction of subsidy, it therefore means that the NNPC would be made to bear the burden of subsidy payment through the reintroduction of under recovery.

The implication of this is that with the under recovery element of cost to be borne by NNPC if subsidy is reintroduced, the amount that would be remitted by the Corporation into the Federation Account would be significantly reduced.

But Kyari, however, said that the NNPC can no longer afford to bear the cost, saying Nigerians would have to pay the actual cost sooner or later.

He argued that market forces must be allowed to determine the pump price of petrol in the country.