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Despite announcing the elimination of petrol subsidy and a subsequent more than 400 percent increase in the price, there’s speculation that the Federal Government might be secretly providing an unspecified sum to product marketers to maintain the current pump price.

President Bola Tinubu declared the end of subsidy payments on Premium Motor Spirit (petrol) during his inaugural speech on May 29, 2023. This announcement led to an immediate hike in the pump price from N189 to approximately N500.

Currently, due to foreign exchange fluctuations and exclusive importation, petrol is being sold at prices ranging from N568 to N617 in different parts of the country.

Sources indicate that the ex-depot price of petrol was N580 per litre in Lagos on Thursday. After factoring in the transportation cost to filling stations and the marketers’ profit margin, the expected selling price should be between N620 and N630 per litre. The variance represents a covert subsidy that the government is absorbing without budget allocation.

In response to negative reactions toward their economic policies, which include the removal of fuel subsidy and currency floatation leading to skyrocketing living costs, the Tinubu administration seems to have chosen to fix the current pump rates and introduce a form of subsidy. This move is likely aimed at preventing further public discontent and preserving the administration’s dwindling support base, as Nigerians endure the hardships stemming from these policies and their impact on the populace.

Despite the removal of petrol subsidy and a subsequent more than 400 percent increase in the pump price, the Federal Government is suspected of clandestinely providing an undisclosed sum to fuel marketers to maintain the present pump price.

During his inaugural speech on May 29, 2023, President Bola Tinubu proclaimed the end of petrol subsidy payments. This declaration promptly led to a surge in the pump price from N189 to around N500.

Currently, petrol is being sold at prices between N568 and N617 due to foreign exchange fluctuations and exclusive importation.

Inside sources indicate that the ex-depot price of petrol was N580 per litre in Lagos on Thursday. After factoring in transportation costs to filling stations and marketers’ profit margins, the expected selling price should be between N620 and N630 per litre. The difference signifies a covert subsidy absorbed by the government without budgetary allocation.

To counter backlash against their economic policies, including removal of fuel subsidy and currency floatation causing increased living costs, the Tinubu administration seems to have chosen to fix the current pump rates and introduce a form of subsidy. This move appears aimed at preventing further public discontent and preserving the administration’s diminishing support base, as Nigerians grapple with the hardships resulting from these policies and their impact on the populace.

This decision aligns with the Nigerian National Petroleum Corporation’s (NNPC) recent securing of a $3 billion crude repayment loan to strengthen the naira and stabilize the foreign exchange market. This move is aimed at reducing fuel costs through naira appreciation, in turn halting further price hikes and eliminating the need for product subsidies.

While the government insists on no subsidy payments, a fuel marketing firm’s official asserts otherwise, noting that market realities contradict official statements. The business has become less profitable due to the surge in fuel importation costs, leading independent marketers to sell their stations to major ones with greater resources to absorb unexpected volatility.

Marketers warned that should the dollar’s value in the parallel market remain at N950, petrol prices may rise to between N680 and N720 per litre in the coming weeks. Additionally, lack of foreign exchange liquidity through the Central Bank of Nigeria’s Importers and Exporters official window has stalled fuel import plans.

The government’s declaration that petrol pump prices won’t exceed N617 per litre indirectly indicates a reinstatement of fuel subsidy, according to oil marketers. They advocate for transparency on the issue rather than imposing set price limits on marketers.

Despite the removal of petrol subsidy and a subsequent more than 400 percent increase in the pump price, the Federal Government is suspected of clandestinely providing an undisclosed sum to fuel marketers to maintain the present pump price.

During his inaugural speech on May 29, 2023, President Bola Tinubu proclaimed the end of petrol subsidy payments. This declaration promptly led to a surge in the pump price from N189 to around N500.

Currently, petrol is being sold at prices between N568 and N617 due to foreign exchange fluctuations and exclusive importation.

Inside sources indicate that the ex-depot price of petrol was N580 per litre in Lagos on Thursday. After factoring in transportation costs to filling stations and marketers’ profit margins, the expected selling price should be between N620 and N630 per litre. The difference signifies a covert subsidy absorbed by the government without budgetary allocation.

To counter backlash against their economic policies, including removal of fuel subsidy and currency floatation causing increased living costs, the Tinubu administration seems to have chosen to fix the current pump rates and introduce a form of subsidy. This move appears aimed at preventing further public discontent and preserving the administration’s diminishing support base, as Nigerians grapple with the hardships resulting from these policies and their impact on the populace.

This decision aligns with the Nigerian National Petroleum Corporation’s (NNPC) recent securing of a $3 billion crude repayment loan to strengthen the naira and stabilize the foreign exchange market. This move is aimed at reducing fuel costs through naira appreciation, in turn halting further price hikes and eliminating the need for product subsidies.

While the government insists on no subsidy payments, a fuel marketing firm’s official asserts otherwise, noting that market realities contradict official statements. The business has become less profitable due to the surge in fuel importation costs, leading independent marketers to sell their stations to major ones with greater resources to absorb unexpected volatility.

Marketers warned that should the dollar’s value in the parallel market remain at N950, petrol prices may rise to between N680 and N720 per litre in the coming weeks. Additionally, lack of foreign exchange liquidity through the Central Bank of Nigeria’s Importers and Exporters official window has stalled fuel import plans.

The government’s declaration that petrol pump prices won’t exceed N617 per litre indirectly indicates a reinstatement of fuel subsidy, according to oil marketers. They advocate for transparency on the issue rather than imposing set price limits on marketers.

“If they want to bring back subsidy, let them say it openly that we are going to come back to subsidy because of the pains the country generally is going through. This is because the initial things they are supposed to do they did not do. We have always been clamouring, let the refineries work.”

Kekeocha added that IPMAN and other dealers had advised the government to get the refineries running before removing subsidy, stressing that the country would not be facing this hardship had the government listened to the marketers.

He stated, “Let the three refineries in the country work. They (the government) didn’t do that, they just came in and jumped into the removal of subsidy and put everybody into a crisis. They should do the needful.

“The NNPC is synonymous with the Federal Government and so, if the government wants to bring back subsidy, they should say it openly. If they bring in the product, for instance at N10 and they sell it to marketers at N8, then they have subsidised the product by N2.

“Therefore, they will now say to marketers, don’t sell more than this price, which means they have reinstated fuel subsidy and will now send the Nigerian Midstream and Downstream Petroleum Regulatory Authority to monitor prices at filling stations.”

Commenting on the $3bn recently loan secured by NNPCL from Afrexim Bank, Kekeocha said, “If you bring forex and make it cheaper and bring products and now fix the price, it means you are going to monitor marketers, because you are going to make retailers to sell within a price band.

“Anybody who sells above it means he is going against the law; this is a reinstatement of subsidy.”

Also speaking on the issue, the Secretary, IPMAN, Abuja-Suleja, Mohammed Shuaibu, said the ex-depot price of PMS in Warri as of Friday was N585/litre, while that of diesel was N820/litre and aviation fuel was N800/litre.

Shuaibu stated, “These are the prices of the products at the depots and not at filling stations. The pump price for petrol, of course, should be around N600/litre in Warri and neighbouring states, but should be higher than that in Abuja and the northern states, because these locations are far from Warri.

“There are no functional depots in Abuja and the North because all the pipelines supplying products to the region have been vandalised. However, we know that if the NNPC should sell petrol based on the forex rates in Nigeria, the cost should be much higher.”

The spokesperson, NNPCL, Garba-Deen Muhammad, could not be reached for comments as he did not respond to calls and messages sent to his mobile phone.

On his part, the President, Petroleum Products Retail Outlets’ Owners Association of Nigeria, Billy Gillis-Harry, explained that in practical terms, one would say subsidy on petrol had returned.

He, however, stated that what the Presidency said about the issue should be taken to be true.

Ngelale had during his media briefing on Tuesday stated that the government would not increase petrol price and would not return subsidy.

Gillis-Harry said, “We heard the President’s firm commitment to keeping deregulation on stream and also ensuring the sustenance of subsidy removal. One would say there is subsidy, going by the rising forex and crude oil prices, but since the President said there is no return of subsidy, let’s take it that way.”

But the National Public Relations Officer, IPMAN, Chief Chinedu Ukadike, insisted that subsidy on petrol was being returned gradually.

Ukadike said, “You can also see the analysis that was made by the Presidency with the cost of the product in neighbouring countries, as well as in the international market. It said no country is selling non-subsidised petrol at N617/litre.

“But that is not a qualitative analysis. You will talk about the purchasing power of your own currency as it were. In Ghana, a bottle of Coke is about N400, but it is about N200 in Nigeria. You won’t say because it is N400 in Ghana, Nigerians should also buy it at N400.

So, that analogy by the Presidency in stating that petrol is cheaper here is not entirely correct. This takes us to the importance of domestic refining, which will enable us to check the demand for dollars and importation of petroleum products.

“If we actually want full deregulation, there must be local production that will check the rise in dollar. For once the dollar is rising, there’s nothing you can do to stop the simultaneous rise in petrol price.

“If not, it means the Federal Government is subsidising petroleum products, which implies that subsidy has indirectly returned.”

Ukadike insisted that the pump price of petrol should be around N680 going by the prevalent exchange rate and the price of crude oil.

He said, “With a template of N554/litre landing or ex-depot cost at the time when one dollar was N750, if you analyse and work out the arithmetic, you will find out that the current pump price of PMS should be around N680/litre now that the dollar is hitting over N850/litre.

“So what we are experiencing now is quasi or semi subsidy, but the government may not want to admit it.”

The Chief Executive, Nigerian Midstream and Downstream Petroleum Regulatory Authority, Farouk Ahmed, had said that going forward, the market would dictate the pump price of PMS as the agency would no longer fix prices or release templates for petrol.

Addressing a press conference in Abuja, Ahmed said market forces would henceforth dictate prices under the liberalised market.

He also disclosed that the Federal Government had scrapped the Petroleum Equalisation Fund as well as the national transport allowance.

The PEF was set up to ensure price uniformity of petroleum products via the reimbursement of marketers for losses they incur in trucking products from depots to their filling stations anywhere in Nigeria.

Similarly, the Senior Special Assistant to the President on Media and Publicity, Tope Ajayi, on Tuesday said there were no plans to reintroduce fuel subsidy.

Ajayi made the assertion on X formerly known as Twitter, at 6.08 pm WAT.

He said, “There is no plan to reintroduce any form of fuel subsidy. There is no condition to support any increase in prices at this time. President Tinubu is convinced based on information before him that we can maintain (the) current pricing without reversing the current deregulation policy by swiftly cleaning up existing inefficiencies within the midstream and downstream petroleum sector(s).”

Port Harcourt refinery

In the meantime, Dr. Joseph Obele, the Chairman of IPMAN in Rivers State, has expressed optimism that the Port Harcourt refinery is likely to surpass the December deadline for the completion of its turnaround maintenance, enabling it to soon refine fuel for domestic consumption.

Obele revealed during an interview with Saturday PUNCH that the progress of work at the refinery had accelerated significantly. Upon a recent site visit, he observed substantial completion of various aspects, including mechanical and civil components.

Although the President had previously assured the nation of the refinery’s operational start by December, the IPMAN leader emphasized that the deadline would only be achievable if the Federal Government appropriately allocated funds to the project.

He explained, “During a recent oversight function at the site, we noticed a significant increase in the workforce, and operations were ongoing 24 hours a day at the Port Harcourt refinery. Previously, the work was progressing slowly, but now I can confidently state that it’s advancing at a much faster pace.

“Progress is encouraging as they have completed the mechanical and civil tasks. The remaining tasks involve electrical installations and technical aspects, which are currently being addressed. With some additional funding from the government, the plant could potentially be operational by November. Stakeholders have suggested that the over N1 trillion saved from subsidy removal should be directed towards enhancing the workforce, which would expedite the project.”

Natural gas committee

To reduce the impact of fuel subsidy removal on Nigerians, the President has approved the establishment of the Presidential Compressed Natural Gas Initiative.

A statement from the State House on Friday said the initiative was poised to revolutionise the transportation landscape in the country by targeting over 11,500 new CNG-enabled vehicles and 55,000 CNG conversion kits for existing PMS-dependent vehicles, while simultaneously bolstering in-country manufacturing, local assembly and expansive job creation in line with the presidential directive.

“The landmark initiative, which comprises of a comprehensive adoption strategy, will include the following: Empowering workshops programme nationwide network of workshops, local assembly and job creation as key points of emphasis with an initial focus on mass transit systems and student hubs in order to significantly reduce transit costs for the general populace in the immediate term,” the statement read in part.

In line with its determination to ensure a seamless integration of CNG utility within the current midstream and downstream energy value chain to support its sustainability, the statement added that PCNGI would facilitate the provision of workshops across all geopolitical zones and states with essential kits and comprehensive training for newly employed staff members, thus creating new opportunities for technical skill development and employment for Nigerians.

“The new nationwide network of workshops to be established through the initiative, would ensure widespread access and demand side utilisation of the CNG technology and CNG-related expertise, thereby facilitating smoother transitions for vehicle owners at the wider benefit of the Nigerian economy,” it added.

On the objectives to be achieved, the statement said, “The development of new stakeholder-operated INTRASTATE MASS TRANSIT systems built on CNG; support for states to onboard new CNG buses as part of their intrastate mass transit network (wholesale conversion, retro-fitting and new purchase).

“The deployment of CNG buses through existing private mass transit operators, including new financing programmes for operators through an innovative asset finance programme.

“Incentivise investors to invest in CNG processing, distribution and utilisation by providing incentives for enhanced investment and partnership.

“Deliver training and technology transfer to support the after-sales services and maintenance sub-industry to create sustainable jobs.

“President Tinubu’s focus on assembling CNG-enabled vehicles within the country will stimulate economic growth, create employment opportunities, and bolster the nation’s automotive manufacturing capabilities.”