‘Eight Cities Where Government Still Pays Fuel Subsidy Despite Denial’ [See Details]

In a surprising revelation, the Nigerian government is reportedly paying an average of ₦501.47 as a subsidy on each litre of petrol in at least eight cities across the country, according to a pricing framework obtained by Premium Times.

This disclosure comes amid the government’s continued denial of reintroducing fuel subsidies after their removal was announced by President Bola Tinubu in May 2023.

The review of Premium Motor Spirit (PMS) data pricing for a trading day on 21 August 2024 revealed the extent of the hidden subsidy, which contradicts the government’s earlier stance on ending the costly practice.

Tinubu, in his inaugural speech on 29 May 2023, declared the removal of the subsidy to alleviate a significant financial burden on the government.

This decision led to an immediate increase in fuel prices from ₦197 to between ₦480 and ₦570 per litre, resulting in widespread economic hardship as transportation costs and the prices of goods and services soared.

In July 2023, the petrol pump price was further raised to ₦617 per litre at Nigerian National Petroleum Company Limited (NNPC Ltd) outlets nationwide.

However, recent reports indicate that the government has quietly reintroduced a subsidy to maintain the pump price at this level, despite the depreciating naira and rising international crude oil prices.

This has led to increased public scrutiny and concerns over the government’s transparency regarding fuel subsidy management.

Despite these reports, the government has consistently denied the existence of any ongoing fuel subsidy, maintaining that the removal was a necessary move to promote long-term energy security and economic prosperity in Nigeria.

The revelation of the continued subsidy payments raises questions about the government’s commitment to its policy of subsidy removal and its implications for the Nigerian economy.

However, PMS pricing framework trading data obtained exclusively by this newspaper shows that the government pays an average of ₦501.4 for each litre of petrol in eight Nigerian cities.

In Lagos State, the indicative pump price at closing FX rate of ₦1,592.67/USD was ₦1,067.24 while the actual pump price was ₦568, indicating that the government is paying ₦499.24 as subsidy.

In Abuja, the indicative pump price at closing FX rate of ₦1,592.67/USD was ₦1,105.04 while the actual pump price was ₦617, meaning that the government is paying the sum of ₦488.04 subsidy for Abuja residents.

For Kano, the indicative pump price at closing FX rate of ₦1,592.67/USD was ₦1,116.34 while the actual pump price was ₦620, indicating a subsidy payment of ₦496.34.

In Calabar, the indicative pump price at closing FX rate of ₦1,592.67/USD was ₦1,081.18 while the actual pump price was ₦591, indicating a subsidy payment of ₦490.18.

In Sokoto, the indicative pump price at closing FX rate of ₦1,592.67/USD was ₦1,121.75, while the actual pump price was ₦620, indicating a subsidy payment of ₦501.75.

In Maiduguri the indicative pump price at closing FX rate of ₦1,592.67/USD was ₦1,135.42, while the actual pump price was ₦637, indicating a subsidy payment of ₦498.42.

In Ibadan, the indicative pump price at closing FX rate of ₦1,592.67/USD was ₦1,075.30, while the actual pump price was ₦580, indicating a subsidy payment of ₦495.3.

For Enugu, the indicative pump price at closing FX rate of ₦1,592.67/USD was ₦1,142.49, while the actual pump price was ₦600, indicating a subsidy payment of ₦542.49.

In April, a former governor of Kaduna State, Nasir El-Rufai, said whether the government admits it or not, the landing cost of petrol shows that there is a form of subsidy being paid.

But Nigeria’s Minister of Budget and Economic Planning, Atiku Bagudu, in an interview with Premium Times, maintained that Tinubu’s administration has scrapped subsidies on petrol.

He referred to the Petroleum Industry Act, which gave autonomy to the NNPC Ltd, as well as the policy decision of the Tinubu administration not to pay subsidy on petrol.

There is a “public policy decision, rightly, commendably and boldly, that we can’t, as a nation, afford fuel subsidy,” Bagudu said.

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Meanwhile, while Bagudu insisted the Nigerian government is not paying subsidies on petrol, the International Monetary Fund (IMF), in a report said that the Nigerian government reintroduced petrol subsidy at the end of last year.

The IMF said subsidy payment is expected to gulp almost half of Nigeria’s projected oil revenue this year. The implicit subsidy will cost Africa’s largest crude producer an estimated ₦8.43 trillion of its projected ₦17.7 trillion of oil revenue, the IMF said in the report.

In a draft copy report of the Accelerated Stabilisation and Advancement Plan (ASAP) presented to Tinubu by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, in June, the government said fuel subsidy is projected to reach ₦5.4 trillion by the end of 2024.

This, it said, compares unfavourably with ₦3.6 trillion in 2023.

Last Week, according to a report by TheCable, Tinubu approved a request by the Nigerian National Petroleum Company (NNPC) Ltd to use the 2023 final dividends due to the federation to pay for petrol subsidy.

In addition, the report said the NNPC told Tinubu 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”.

The report said the NNPC Ltd cried out to Tinubu in June that the subsidy payments were negatively impacting its cash flow and it was struggling to remain a “going concern”.

The company said it might not be able to sustain petrol imports because of the ballooning subsidy bill, which it blamed on “forex pressure”.

But announcing a net profit of ₦3.297 trillion at the close of the financial year ending December 2023, last week, the Chief Financial Officer of the NNPC Ltd, Umar Ajiya, claimed that the company was not paying subsidy on petrol, saying the company was only taking care of petrol importation shortfall between it and the federation.