Nigerian government finally pooh-poohed its own lies about petrol subsidy after years of denial by the Buhari administration. Last Thursday, the administration admitted paying petrol subsidy, saying it cant continue with it. Disclosing this, Kyari Kolo Mele, the Managing Director of the Nigerian National Petroleum Corporation, NNPC, said the government pays up to N120 billion monthly.

Many analysts told BusinessHallmark that the latest admission may have set the stage for another round of price hike and with it untoward hardship to Nigerians already pauperised by COVID and distressed economy. For sometimes now, the administration has been sending mixed signals on its stand on petroleum subsidy.

Nothing underscores this than the administration’s plan to rehabilitate the Port Harcourt refinery at the time of deregulation of the sector with he sum of $1.2 billion, when such refinery ought to have been sold in full compliance with deregulation of the sector. Even at that both the minister of state for petroleum resources and the managing director of the Nigeria National Petroleum Corporation have quoted different figures for the rehabilitation.

The two high -ranking officials have contradicted each other on the exact amount to be released by African Export-Import Bank (Afreximbank), as loan to fund the $1.5billion proposed for the Turn Around Maintenance (TAM) of the 210,000 barrel per day (bpd) Port Harcourt Refinery. In separate interviews with newsmen, the duo gave separate figures; as the Minister said $500million would be needed for the turnaround, while the GMD stated that $1billion is the proposed fund to do the maintenance and rehabilitation.

In a chat with newsmen in Abuja on March 22, Mele Kyari noted that the Federal Government entered into a $1 billion financing arrangement with the Afreximbank to finance the project. According to him, The bank has promised a 500-million-dollar loan in the first instance and additional 500 million dollars making it one billion dollars and the condition is for the loans to be repaid from the operations and proceeds of this plant.”
Now that the Federal Government has officially confirmed the subsidy regime as the Petroleum Products Pricing Regulatory Agency, PPPRA, two weeks ago fixed the pump price of Premium Motor Spirit, PMS, at N212.61 per litre, for the month of March, and with the exhaustion with subsidy just announced by the NNPC MD, the price of petrol will go up beyond what average Nigerians can afford.

It should be noted however, that the fact that price of the commodity is still being sold at an average of N170 in petrol stations across the country, signaled that the federal government, through NNPC is expending an average of N42 to subsidise a litre of the commodity for Nigerians.

Recall that PPPRA had early on confirmed that fuel subsidy of fact officially returned in February 2021. In the view of the downstream oil sector regulator, the actual pump price of PMS for February was between N183.74 and N186.74 per litre, meaning that the Federal Government paid an average of N16 per litre for PMS in the month.

According to PPPRA, in January 2021, it disclosed that the price of the commodity was between N163.36 per litre and N166.36 per litre. With the latest statement from NNPC boss about exhaustion with payment of subsidy and intention to remove it, it is most likely the administration may raise the prices of petrol. In a ministerial briefing last week, Kyari,gave an insight into the thinking of government in Abuja.

Kyari emphatically stated that the corporation can no longer continue to bear the differentials in prices. Kyari, at the briefing, said Petroleum products are underpriced in the country when contrasted with other neighboring countries where, according to him, Nigerian petrol is sold between N300 to N550 per litre. He said that the price of the product in Nigeria should have been between N211 and N234 per litre.

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, Kyari said.

In his words, that is why early last year if you recall, the full deregulation of the PMS market was announced and we have followed this through until we got to September when prices shifted to N145.

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. In some countries, the Nigerian fuel is their primary fuel. We are supplying almost everybody in the West African region, so it is very difficult to continue this because we have our own issues and that is why the eventual exit from this is completely inevitable.

When that will happen, I do not know. But I know that engagements are going on. The government is very concerned about the natural impact of price increases on transportation and other consumer segments of our society and as soon as those engagements are taken to logical conclusion, I am sure that the market price of PMS will be allowed to play at the right time.

Dr. Olufemi Omoyele, an economic analyst said the regulator may be dancing to the drumbeat of Petroleum Products Pricing Regulatory Agency (PPPRA) which earlier this month published on its website a new template for the prices of the product which it put between a market band of N209.61 and N212.61.

It also put the ex- depot prices of the product at N206.42 per litre and landing cost at N189.61. Two weeks ago, the country was thrown into turmoil over rumoured increase in prices, as queue and pump price adjustment returned. The public outcry that attended the development was unmistakably a clear message to the government that Nigerians are not ready for any price increase.

Recall that some petroleum marketers took advantage of the situation to hike the prices of the product before the Minister of State for Petroleum Resources, Mr. Timipre Sylva, intervened for nomalcy to return. The PPPRA thereafter hastly pulled down the website where the controvesial price template was published.

The NNPC boss also emphasised the differential cost was covered by the NNPC, saying while the actual cost of importation and handling charges amounts to N234 per litre, the government is selling at N162 per liter. He said sooner or later Nigerians would have to pay the actual cost for the commodity.

Even with the clear situation, Mr. Kyari did not refer to the cost as subsidy. He merely said the NNPC pays between N100 and 120 billion a month to keep the pump price at the current levels. Peter Adeola, the managing director of Dell Petroleum, told BusinessHallmark that “well, we marketers cannot be blamed for all this, the fact is that the successive administrations have not managed the sector well. We should know that the Federal government cannot continue to pay subsidy but the blame of economic mismanagement rests on government.
If the economy is fine and doing well, Nigerians will have money in their pockets and will be able to afford paying for the right pricing of petroleum.”

In his own reaction to imminent increase possibility in the price of petrol, Martin Chukuweke, a Lagos -based legal practitioner said, “The administration is criminal. How can you contemplate removing subsidy at the time of COVID, when Nigerians are worried over their future, and already made poor by maladministration of the current regime?”
The government has never been sincere in all this process. Recall that during the uproar that characterised the rumoured increase two weeks ago, Sylva, NNPC and PPPRA strove to salvage the situation, stating that the pump price remained unchanged. The minister, who delivered assurances while addressing newsmen in Lagos, two weeks ago, said:
Irrespective of the source of that information, I want to assure you that it is completely untrue. Neither Mr. President, who is the Minister of Petroleum Resources, nor myself, who deputise for him as minister of state, has approved that petrol price should be increased by one naira.

I, therefore, urge you to disregard this misleading information.

He stated that in the months, the government had entered into consultations with organised labour to find the least difficult option to respond to the global rise of crude price, which has inevitably led to increasing in petrol prices, adding that it was unthinkable that government would unilaterally abandon these discussions and act in the manner suggested by the information under reference.

Professor Akindele Agbaso, mineral resources expert told this newspaper that “while I do not have issue with removal of subsidy but the timing is wrong. It should have been a phased removal based on how the economy rebounds, when Nigerians’ economic situation has improved tremendously. Not now.

The Secretary of People’s Democratic Party , Kola Ologbondiyan, said any such increase is capable of worsening an already tensed situation and lead to the economic and social crisis in the country. The party said that there was no way that Nigerians could survive such a hike, as it will worsen the already agonising economic situation in the country.
Many Nigerians spoken to by this newspaper condemned the timing of the planned removal of subsidy as the NNPC boss’ statement denotes possibility of imminent removal.