Group General Manager Nigerian National Petroleum Corporation (NNPC) Mele Kyari has said the federal government spends N120 billion monthly to subsidy the pump price of Premium Motor Spirit (PMS) for Nigerians.
Speaking at the weekly ministerial briefing held at the Presidential Villa, Abuja, Kyari said while the actual cost of importation and handling charges of petrol amounts to N234 per litre, the government had been selling at N162 per litre, therefore, bearing the difference.
His words: “The price could have been anywhere between N211 and N234 to the litre. The meaning of this is that consumers are not paying for the full value of the PMS that we are consuming and therefore someone is paying that cost.
“As we speak today, the difference is being carried in the books of NNPC and I can confirm to you that NNPC may no longer be in a position to carry that burden.”
Hinting that petrol price maybe increases any moment from now, Kyari explained that the NNPC can no longer afford to bear the cost of the subsidy, saying Nigerians would have to pay the actual cost sooner or later.
“As we speak today, I will not say we are in a subsidy regime but we are in a situation where we are trying to exit this subsidy or underpriced sale of PMS until we get in terms with the full value of the product in the market.
“Today, PMS sells across our borders anywhere above N300 at any of our neighbours. And in some places, it is up to N500 and N550 to the litre,” he added.
He, however, argued that market forces must be allowed to determine the pump price of petrol in Nigeria.
Recently, the Petroleum Products Pricing Regulatory Agency (PPPRA) released a template, increasing the petrol price to N212 per litre.
After the increase was announced, on Friday, 12th March 2021, NNPC insisted there will be no increase in the ex-depot price of petrol.
On re-checking the PPPRA website, the template indicating the increase was deleted with Timipre Sylva, the minister of state for petroleum resources, assuring that the agency will issue a monthly guide to NNPC and marketers on the appropriate pricing regime.
How Petrol Subsidy Is Wrecking The Nigerian Economy
For many years, the fuel subsidy system practised in Nigeria, attracted widespread criticisms from economy stakeholders and international bodies, particularly the International Monetary Fund (IMF).
The fund has persistently been suggesting the need for the Nigerian government to stop the payment of subsidy for the sake of the country’s economic stability and growth.
Christine Lagarde, the former Managing Director of IMF, had recommended the removal of fuel subsidy for the President Muhammadu Buhari-led administration.
According to Lagarde, fuel subsidy removal is important due to the low contribution of tax revenue to Gross Domestic Product (GDP).
Lagarde maintained that if fuel subsidy is removed, the funds could be diverted to the health, education and infrastructure sectors.
IMF Executive Board under the leadership of Lagarde, had suggested in the fund’s 2019 Article IV Consultation with Nigeria, that phasing out implicit fuel subsidies while strengthening social safety nets to mitigate the impact on the most vulnerable, would not only help the country in reducing its poverty gap but would also address its economic woes.