Despite fuel subsidy removal, the Federal Government is said to be paying subsidy on Premium Motor Spirit (PMS), Festus Osifo, the National President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), revealed.
President Bola Tinubu had in his inauguration declared that the subsidy era is gone, triggering a hike in the cost of the commodity across the nation.
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 Nigerian National Petroleum Company Limited (NNPCL) have not officially admitted that subsidy on petrol has been reintroduced.
But months after the announcement, Osifo, who is also the president of the Trade Union Congress (TUC), said due to the cost of crude oil in the international market and the dollar to naira rate, the government still pays subsidy for the product.
“They [government] are paying subsidy today,” he said on Channels Television’s Politics Today on Friday.
“In reality today, there is subsidy because as of when the earlier price was determined, the price of crude in the international market was somewhere around $80 for a barrel. But today, it has moved to about $93/94 per barrel for Brent crude. So, because it has moved, then the price [of petroleum] also needed to move,” the PENGASSAN boss added.
For the government to stop subsidising petroleum, he said two things must happen.
“The only reason the price will not move is when you are able to manage your exchange rate effectively and you are able to pump in supply and bring down the exchange rate,” Osifo maintained.
“So, if the exchange rate comes down today, we will not be paying subsidy. But with the exchange rate value and the price of crude oil in the international market, we have introduced subsidy.”
The fuel subsidy had been in place for decades and kept petrol prices artificially low in what was seen by many Nigerians as one of their benefits from the government.
However, the measure costs the country billions annually because although Nigeria is a major petroleum producer, it imports most of its fuel needs due to its lack of refineries.
President Tinubu acknowledged the challenges facing Nigerians in the wake of the subsidy removal but in July rolled out measures to cushion the impacts.
To “reduce the burden,” he pledged at least $264 million for agriculture, $165 million for small and medium-sized businesses, and $99 million for manufacturing.
“In the short and immediate terms, we will ensure staple foods are available and affordable,” he said.
“To this end, I have ordered the release of 200,000 metric tonnes of grains from strategic reserves to households,” Tinubu added.
Recall that before Tinubu announced the end of fuel subsidy in May, the scheme had consumed trillions of naira from the government’s purse.
In October 2022, The PUNCH reported that the government of former President Muhammadu Buhari had spent about N6.88tn in subsidising petrol at the time.
This was based on data obtained from the Nigerian National Petroleum Company Limited and the Nigeria Extractive Industries Transparency Initiative.
NEITI report showed that fuel subsidies gulped N316.7bn in 2015; N99bn in 2016; N141.63bn in 2017; N722.3bn in 2018; N578.07bn in 2019; and N134bn in 2020.
Although the NEITI report did not state the amount spent in 2021 and 2022, figures obtained from NNPCL indicated that fuel subsidy jumped to N1.43tn in 2021.
