Pump price of petrol has been slightly adjusted as the Federal Government commences gradual removal of the petrol subsidy.
Prices of the product simultaneously rose to above N185 per liter on Thursday.
Government had earlier announced implementation of the withdrawal in April 2023, about three months ahead of the initial plan to effect a complete stop to the expenditure.
Motorists in Abuja and Lagos who queued for long time as usual at filling stations operated by major oil marketers were shocked to notice the adjustment on getting to the pumps.
Mrs Zainab Ahmed, Minister of Finance, Budget and National Planning, who recently hinted during an interview with ARISE TV on the sidelines of the World Economic Forum in Davos, Switzerland, said the subsidy removal appears to be the position of all contestants to the leadership of the country in their political campaigns for next month’s general elections.
She stated: “What will be safer is for the current administration to, maybe at the beginning of the second quarter, start removing the fuel subsidy, because it’s more expedient if you remove it gradually than to wait and move it all in one big swoop”.
After an 18-month extension, the Federal Government plans to spend N3.35 trillion on petrol subsidies from January till June 2023.
The extension, however, generated widespread debate on the expediency of such expenditure as it will increase the budget deficit of the FG which would be financed through additional borrowing and hence further rise in the nation’s public debt which stood at N44.06 trillion as at end of September 2022.
Investigations yesterday showed that government has begun the subsidy withdrawal urging marketers to adjust their pumps.
However, efforts to get reactions from marketers was unsuccessful as key marketers association were considering on how much could be applicable.
Equally, leadership of Independent Depot Owners were not ready to discuss the matter.
However, a competent source in the industry with knowledge of government new directive to marketers confirmed the development to our Correspondent.
A source said, “Marketers have been officially directed to change pump price of petrol. Go to stations operated by major marketers you will confirm what I have told you. But I think it shouldn’t be above N185 a liter. I can tell you too that depot owners are not expected to raise their prices but they have been asked to recover their costs by adjusting their prices.”
The cost of fuel pump increased from N87 per litre as of December 2015 to N165.77 by December 2021, which is an increase of 90.54 per cent according to the Fuel Pump Price Per Litre – Average (PMS) data from the Central Bank of Nigeria, CBN.
The Nigerian National Petroleum Company Limited, NNPCL, enjoys monopoly the sole importer of petrol in Nigeria in 2016 after the Federal Government introduced the price modulation mechanism, which saw the pump price of the commodity rise.
However, in May 2016, the value of crude oil in the international market soared, while the value of Nigeria’s currency, the naira, slid to almost N500/dollar, from about N197 to the dollar.
This unfortunately hit back at the landing cost of petrol, which rose steeply, and the country not willing to hike the pump price of the commodity again, soon returned to subsidising the product.
Consequently, the fuel subsidy gulped N306.92bn in 2015, and in 2021, the NNPC said fuel subsidy gulped N1.43trillion, indicating that the cost of fuel subsidy rose by 365.92 per cent within the six-year period.
The NNPC called the subsidy payments under-recovery and deducted it from the proceeds of its domestic crude oil sales, before making remittances to the Federation Account.
The World Bank and the International Monetary Fund have decried the continued spending by the Nigerian government on the petrol subsidy, urging the government to end the subsidy regime.
However, the Nigeria Labour Congress and other pressure groups and trade unions had threatened nationwide protests against the removal of the fuel subsidy.
Although the Federal Government had planned to eliminate the fuel subsidy by June 2022, but changed the plan and extended the subsidy regime by 18 months.
The Nigerian Bar Association, NBA, had equally described the decision of government to suspend its planned petrol subsidy removal as an election strategy.
Also, the NNPC has said a total of N4tn from the Federal Government is required to fund the fuel subsidy in 2022.
According to the NNPC, fuel subsidy gulped N675.93bn in the first quarter of 2022.
The NNPC informed that fuel subsidy gulped N210.38bn, N219.78bn, and N245.77bn in January, February, and March 2022 respectively.