Nigeria Pays N1trn Monthly Subsidy to Keep Petrol at N650/Litre

March 3, 2024
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By Aduragbemi Omiyale

Despite the federal government claiming it has stopped the payment of subsidies on premium motor spirit (PMS), well-known as petrol, more people are countering this.

Recall that a few weeks ago, the International Monetary Fund (IMF) said the government had returned fuel subsidies through the backdoor and kept Nigerians in the dark about this.

It then advised the government of President Bola Tinubu, which announced an end to it on May 29, 2023, to completely stop the payment as it was increasing his administration’s fiscal deficit.

The global lender, in a report released last month, said the Nigerian government had “capped retail fuel and electricity prices” ostensibly to “ease the impact of rapidly rising inflation on living conditions,” “thus partially reversing the fuel subsidy removal.”

However, it advised that petrol subsidies “should be phased out completely” because “Fuel and electricity subsidies are costly, do not reach those that most need government support.”

Also, petroleum marketers have claimed the government was paying subsidies to keep the pump price constant.

Recently, the Managing Director of Pinnacle Oil, Mr Robert Dickerman, while speaking on a panel of discussion at session six of Nigeria’s Downstream Forum at the Nigeria International Energy Summit (NIES) in Abuja, disclosed that the government was paying about N1 trillion monthly to make it possible for consumers to buy the product between N568 per litre and N650 per litre.

“Foreign investors, foreign lenders and government-run DFIs have been very clear about what they want to see: Conservative fiscal policy, tackling corruption, enabling competitive markets, and enforcement of fairness in markets through policy, regulation and the ability to enforce contracts. Keeping that context in mind, I want to point out that there is still a massive subsidy for PMS, albeit in the FX portion of PMS prices, not the global price in dollars.

“The consequences of this subsidy are: the cost of gasoline in Nigeria is the lowest in Africa by far, which encourages smuggling, further depriving Nigeria of value.

“Smuggling causes Nigeria to subsidize neighbouring countries even while our economy struggles. The cost is hurting the entire budget, federal and state, as critical programs cannot be funded to pay for this subsidy. It is currently calculated to be about N1 trillion per month.

“Also, with this subsidy in place, ceasing subsidy payments would result in no petrol supply if there are no refineries producing gasoline. All supplies come from the international market which will only sell at market prices.”

Aduragbemi Omiyale

Aduragbemi Omiyale is a journalist with Business Post Nigeria, who has passion for news writing. In her leisure time, she loves to read.

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