A day after the implementation of the new petrol price regime for the post-subsidy removal era, it has emerged that the government owes the Nigerian National Petroleum Co. more than $6 billion that the firm has spent to keep gasoline cheap.
The state-owned oil company shouldn’t keep absorbing the burden of preserving one of the lowest prices of the fuel in the world, Chief Executive Officer Mele Kyari told reporters in the capital, Abuja, on Tuesday, welcoming President Bola Tinubu’s decision to stop the payments that cost more than $10 billion last year.
According to Bloomberg, the NNPC is waiting for the government to pay a 2.8 trillion naira ($6.1 billion) debt, Kyari said. “We can’t continue to build this,” he said.
Following Tinubu’s first address to Nigerians after taking the oath of office on Monday, queues formed outside petrol stations, which have already started raising their prices.
This was followed Wednesday morning by the adjustment of petrol price at NNPC stations in Lagos to N488 a litre, Abuja N537 a litre and Port Harcourt N511 per litre.
Phasing out the subsidies could significantly increase transport costs and could trigger social unrest as it did during a previous effort to remove the payments in 2012.
Although Nigeria is Africa’s biggest oil producer, the NNPC purchases all the country’s gasoline from overseas via crude-for-fuel swaps with local and international traders before selling the imported products at a loss to wholesalers and retailers.
The Tinubu administration plans to license other gasoline importers, according to Farouk Ahmed, chief executive of the Nigerian Midstream and Downstream Petroleum Regulatory Authority. This will introduce competition into the industry, he said alongside Kyari at the presidency.
While the previous government under President Muhammadu Buhari was supposed to fund the subsidies for the last 18 months, most of the cost has been “supported by the cash flow from NNPC’s other businesses,” Kyari said. “Since you cannot pay, you cannot expect NNPC to continue to carry it.”
