Rising landing costs are set to send the Nigerian National Petroleum Company (NNPC) ‘secret’ bill for fuel subsidies rocketing, threatening to exacerbate the already precarious economic situation of Africa’s largest oil producer, BusinessDay’s findings have revealed.
At the black-market rate of N1,610 per dollar, findings showed the landing cost of petrol, which includes the product’s international price, shipping, insurance, and other charges, increased to N1,117/litre from N720/litre in October 2023.
“Lack of transparency in the pricing and importation process has led to significant revenue leakages and potential hidden subsidies,” Bello Rabiu, independent consultant and former chief operating officer, upstream of NNPC said at a virtual event.
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He added that the market lacks a clear, competitive framework, resulting in inefficiencies and high costs
Rabiu emphasised that PMS is the only regulated product, adding that the regulation is essential due to its significant role in the downstream sector.
According to Rabiu, “To achieve an efficient oil and gas sector across upstream, midstream, and downstream systems, the market must be liberalized, with all refineries and pipeline works operational.
He noted that the NNPC is running a monopoly as the only supplier, a dominant player in the sector.
Rabiu lamented that the country is still bleeding because the exact amount paid as a subsidy remains unknown.
He said, “We are yet to see the supposedly gone subsidy”.
Wumi Iledare, a professor of energy economics and a senior expert in Nigeria’s oil and gas sector said the cost of PMS in Nigeria was far below the international price, considering the price of diesel.
“The gap between the cost of diesel and petrol in Nigeria is much. It is never like that all over the world. That means something is wrong.
“I don’t know if NNPC is paying subsidies or not, but somebody is absorbing the difference. You can call it under-recovery or subsidy, but the price of petrol today does not reflect the market cost of producing a litre of petrol,” he disclosed.
On Thursday, BusinessDay checks showed the parallel market operators are quoting a buy price above N1,600/$1 for holders of naira looking to buy dollars, as the local currency faces rising pressure.
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Platforms such as Trove, Remitly, Bamboo, and PiggyVest are selling the dollar above N1,630 as of Thursday, July 18, 2024.
On Wednesday, Femi Soneye, chief corporate communications officer of NNPC Limited said the NNPC Ltd has not looked back in its transparency journey, publishing every information that the public should know.
“In the face of various allegations of financial malfeasance, NNPC Ltd has always made itself available for probes or opportunities for reconciliation of figures with other agencies of government as the case may be; and, it has always been vindicated,” Soneye said in his article published on BusinessDay.
President Bola Tinubu, during his inaugural speech on May 29, 2023, declared that subsidy on petrol was gone, a declaration that was effectively implemented the next day by the NNPC.
Before Tinubu’s declaration, the pump price of petrol was below N190/litre. However, it jumped to over N500/litre after the president’s statement, and moved up again to over N600/litre a few weeks later.
While the federal government has repeatedly denied the payment of any subsidy on petrol, a report submitted to President Tinubu by the finance minister, Wale Edun, and seen by BusinessDay showed the government’s projection on subsidy.
According to the report, fuel subsidy is projected to gulp about N5.4 trillion in 2024 as against the N3.6 trillion budgeted for the same intervention in 2023.
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The finance minister, Edun, told reporters also that subsidy removal is an ongoing process, suggesting that a complete removal is not yet achieved.
“It is an ongoing conversation, it is an ongoing process of ensuring that fuel subsidy that fuel subsidy is eliminated from the Nigerian economy, that is what Mr. President intent is and that is what is being worked towards,” Edun said in an interview May.
