NNPC: Fuel subsidy, refinery gulped N1.3tn in five months

The cost of fuel subsidy in Nigeria increased by 890% between 2017 and 2021 in Nigeria even though fuel prices have only increased by 12.1%, a new report by research firm, SBM Intelligence, said.

The report titled “Growing fuel prices and transport costs: Which way Nigeria?” stated that between 2017 and 2018, the cost of fuel subsidy had increased by a whopping 405% yet fuel price remained constant all through.

In a bid to keep fuel price down, the Federal Government has been forced to continue paying petrol subsidies which have continued to rise over the years. To retain the pump fuel price at N145 in 2017, the NNPC said that it spent N144.53 billion in subsidising petrol, whereas transport costs ranged from N122 to N138, an obvious rise.

By 2019, the cost reduced by 25%, but the decrease is insignificant in comparison with the initial 405% increase.

2020 saw an alarming spike as the government incurred N1.192 trillion on subsidy, more than double the cost for 2019.

Over this five-year period, petrol prices increased by 12.1%, petrol subsidy by 890% and transport cost by 283%.

The report added that by 2021, subsidy had gulped N1.43 trillion, a stunning rise of 890%, highlighting that the NNPC has requested N3 trillion from the government to fund the subsidy this year in the aftermath of Abuja shelving its plan to withdraw the subsidy by January 2022 as demanded by the Petroleum Industry Act (PIA) which was signed into law in August 2021.

The price of petrol has continued to rise through the years due to the pricing template of the now-defunct Petroleum Products Pricing Regulatory Agency (PPPRA)

The report noted that despite petrol subsidy payments, transport costs and petrol prices increased disproportionally from 2017 to 2021.

According to the report, from 2017 to 2021, transport costs witnessed a steady rise where fuel price was almost constant.

“This suggests that there are other factors driving the transport cost and also artificially keeping fuel price down. And the answer wasn’t far-fetched in the huge amounts that went into fuel subsidy for the period,” SBM Intel said.

 

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