Victor Ezeja
Further depreciation of naira while the pump price of Premium Motor Spirit (PMS) popularly called petrol sells between N617 and N650 have resurrected contentious debates between independent petroleum marketers and the Nigerian National Petroleum Company Limited (NNPCL) over whether the Federal still pays subsidy or not.
This altercation unfolded amid the naira’s continual depreciation against the US dollar in both official and black markets. The naira closed at 998/dollar in the official market and traded at N1,225/dollar in the black market on Tuesday, raising concerns that the price of petrol is expected to further increase given that the country is currently solely dependending on imports and therefore susceptible to vagaries in the international oil market.
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Economists and oil marketers have asserted that naira depreciation and crude oil costs in the international market are factors that could lead to a hike in price of petrol to around N1,200/litre in a free market scenario.
The Federal Government announced the removal of fuel subsidy on May 29, leading to sudden hike in price of the commodity from around N189 to above N500 per litre. Subsequently, it skyrocketed to above N600.
Marketers and economists expressed believe that if government is not subsidising the cost of petrol, the price is expected to further rise as the exchange rate between dollar and naira have continued to increased since the subsidy removal was announced.
Bismarck Rewane, CEO of Financial Derivatives Company, stated that while the government claimed to have totally removed subsidy, what is happening shows that it only reduced it. Speaking in an interview on a Channels TV programme, Mr Rewane pointed out the consequences of reduced subsidies, emphasizing the impact on citizens’ income.
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, stated that the retention of partial subsidy was due to socio-economic reasons, emphasizing the need for a balanced approach considering the people’s well-being.
Responding, the Chief Corporate Communications Officer of NNPCL, Olufemi Soneye, dismissed assertions made by economists and marketers about retention of subsidy as mere assumptions. He reiterated the government’s stance on halting fuel subsidies, echoing President Bola Tinubu’s declaration of “subsidy is gone,” during his inauguration on May 29, 2023.
Furthermore, the NNPC reported numerous cases of crude oil theft in the Niger Delta, indicating 112 incidents within a week, underscoring the ongoing challenges faced in curbing such illegal activities, which impact the country’s oil production quotas.
As the debate rages on between stakeholders amidst economic challenges, the future of fuel subsidies and the stability of the naira remain uncertain, posing critical concerns for Nigeria’s economic landscape.
The only ray of hope now is expectation that the Port Harcourt and Dangote Refineries would commence production of petroleum products for domestic consumption early this year.
