Marketers Forecast FG Would Spend N1.68 Trillion for Fuel Subsidies at 900/Litre
According to a review of information provided by oil marketers and the industry, the Federal Government may spend roughly N1.68 trillion on subsidies for Premium Motor Spirit, also known as gasoline, between September and December of this year.
According to PMS dealers, the pump price of petrol should be between N890 and N900 per litre, given the depreciation of the naira against the US dollar and the rise in the price of petroleum on the world market on Thursday.
Depending on the area, petrol currently costs between N598 and N617 per litre, which feeds rumors that the Federal Government is subsidizing the good.
The reintroduction of the petrol subsidy has not been publicly acknowledged by the government or the NNPCL. In his inaugural address on May 29, President Bola Tinubu declared the subsidy regime to be over.
Through the Nigerian National Petroleum Company Limited, the government finances PMS. PMS is only imported by NNPCL. Other merchants who couldn’t obtain foreign currency ceased importing PMS.
The elimination of the subsidy caused the price of gasoline at the pump to rise from roughly N198 per litre in May to the current level of N617 per litre. But the cost of PMS has continued to increase as a result of the naira’s decline and the price of crude oil.
Over 80% of the cost of PMS, according to dealers in the downstream oil sector, may be attributed to the price of crude oil and the naira-dollar exchange rate.
On Thursday, Brent crude, the standard for all other crude oil, increased to approximately $95 per barrel. The highest price in 2023 was $97 a barrel, where it had reached its peak the day before.
When the year began, oil was trading about $82/barrel, fell to $70/barrel in June, and then increased to above $94/barrel in the past week.
Additionally, the naira continued to fall on Thursday after trading at 980 to the dollar on Wednesday’s black market.
The naira was worth 950/$ when it was converted to dollars a week ago.
The naira did, however, slightly strengthen on the FMDQ at the Investor & Exporter FX window after closing at 770.71/$ on Wednesday as opposed to 776.76/$ on Tuesday.
According to oil marketers, the recent increase in crude prices and the FX crisis have rendered it difficult for the price of petrol to continue at N617 per litre. They said that undercover government officials had reinstated fuel subsidies.
According to a media report on Thursday, the Federal Government will pay a subsidy of N169.4 billion in August 2023.
The report stated that Nigeria received $275 million in dividend payments from Nigerian Liquefied Natural Gas through NNPCL, citing a Federal Account Allocation Committee document.
The report states that NNPCL spent $220 million (or N169.4 billion at N770 per dollar) of the $275 million to pay for the PMS subsidy in the review month.
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