Fuel Subsidy: FG allegedly paid N169.4bn in August, may pay N1.68trn in September

The Federal Government(FG) may spend about N1.68tn as subsidy on Premium Motor Spirit, popularly called petrol, from September to December this year, an analysis of data provided by oil marketers and the sector has shown.

PMS dealers stated that the pump price of petrol should be between N890 to N900/litre based on the fall of Naira against the United States Dollar and the surge in the price of crude in the international market.

Petrol currently sells at between N598 and N617/litre depending on the location of purchase, fuelling suspicion that the commodity is being subsidised by the Federal Government.

The government and the NNPCL have not officially admitted that subsidy on petrol has been reintroduced. 

The government subsidises PMS through the Nigerian National Petroleum Company Limited. NNPCL is the sole importer of PMS. Other marketers stopped PMS imports due to their inability to access foreign exchange.

The removal of subsidy led to an increase in the pump price of petrol from about N198/litre in May to the current rate of N617/litre. But the fall of the Naira coupled with the rise in crude oil price have continued to mount pressure on the cost of PMS.

Dealers in the downstream oil sector explained that the cost of crude oil and the exchange rate of the naira-dollar accounted for over 80 per cent of the cost of PMS.

Brent crude, the global benchmark for oil, rose to about $95/barrel on Thursday. It had peaked to $97/barrel the preceding day, which was the highest figure in 2023.

Oil had started the year at about $82/barrel, dipped to $70/barrel in June, but traded above $94/barrel in the past week.

An unconfirmed report had it that the Federal Government paid N169.4bn subsidy in August, 2023.

Quoting a Federal Account Allocation Committee document, the report said the Nigerian Liquefied Natural Gas paid $275m as dividends to Nigeria via NNPCL.

NNPCL, according to the report, used $220m (N169.4bn at N770/$) out of the $275m to pay for the PMS subsidy in the review month.

In July, data from the Nigerian Midstream and Downstream Petroleum Regulatory Authority showed that between June 1 to June 28, 2023, which was described as the post-deregulation period, the total petrol consumption across the country was 1.36 billion litres, while the average daily consumption was put at 48.43 million litres.

With an average daily consumption of 48.43 million litres and an estimated subsidy of N290/litre, the government could be incurring N14.04bn as subsidy daily, while this could rise to N421.3bn monthly.

Sources claimed this could rise to as high as N1.68tn for the months of September, October, November and December 2023, should the naira continues its fall against the dollar and crude price maintains its upward surge.

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