The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has said that the government is still paying subsidies on petrol due to the cost of crude oil in the international market and the exchange rate.
President Tinubu announced the removal of fuel subsidy on his first day in office, leading to an increase in fuel price from N197 to N480 and N570. The pump price was subsequently reviewed upward to N620.
However, there were reports that the price would go up further due to fluctuation in the global oil market. There were reports that the federal government intervened to prevent a further rise in pump price, but the government denied this.
Speaking on Channels Television’s Politics Today, Festus Osifo, National President of PENGASSAN, said due to the cost of crude oil in the international market and the exchange rate, the government still pays subsidies on petrol.
Read also PENGASSAN insists on NLNG model for Nigeria’s refineries
“They [government] are paying subsidy today. In reality, today, there is a subsidy because, as of when the earlier price was determined, the price of crude in the international market was around $80 for a barrel. But today, it has moved to about $93/94 per barrel for Brent crude. So, because it has moved, the price [of petroleum] also needed to move,” he said.
He said two things must happen before the government can stop subsidising petroleum.
“The only reason the price will not move is when you can manage your exchange rate effectively and pump in supply and bring down the exchange rate.
“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 PENGASSAN boss said.
The return of fuel subsidy is a major setback for Tinubu’s economic reform agenda. It is also likely to lead to increased government spending and deficit.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
