Despite warnings, FG’s spending on fuel subsidy hits N40.1bn daily

In spite of the series of warnings from international bodies, economic stakeholders and experts, the Federal Government’s (FG) daily spending on fuel subsidy has hit N40.1 billion.

Oil markers in the country stated that as of Sunday, June 26, 2022, petrol was at least N600 per litre.

However, going by recently-obtained data from the Nigerian National Petroleum Company Limited (NNPC), which showed that the year-to-date daily consumption of petrol in the country was 66.8 million litres, the FG lavishes at least N1.243 trillion on fuel subsidy every month.

Explaining how the subsidy payments are cushioning the effect of high petrol costs on Nigerians, the oil markers said the commodity was often higher than the cost of diesel.

“The cost of petrol in Nigeria is about the cheapest in the world. And this is because of subsidies. The subsidy is not small, it is so great,” the Deputy National President, Independent Petroleum Marketers Association of Nigeria (IPMAN), Zarma Mustapha, explained.

“Diesel is going for about N850 per litre currently because there is no subsidy on it. And this means petrol price should be almost the same price if not for subsidy.”

He, however, said the subsidy payments are not sustainable, adding that the challenge in the downstream oil sector is now extending to retail outlets seriously.

“Many independent marketers who were selling at the N165 per litre price have closed shop over time because it is not sustainable and is killing our businesses.

“So with the current dynamics going on in the industry, it is not realistic to sell PMS at N165 per litre. I want to tell you one thing, in the whole world there is no place that petrol is being sold at the price we are selling it in Nigeria,” Mustapha added.

This writer understands that amongst the international bodies that have consistently urged the Nigerian government to stop its subsidy payments, is the International Monetary Fund (IMF).

Recently, it warned that the subsidy payments could hit N6 trillion by the end of this year.

Fuel subsidy payment figures

SBM Intelligence, a research consultancy firm, recently published a report titled - ‘Growing fuel prices and transport costs: Which way Nigeria.’

In the report, it was disclosed there-in that the cost of fuel subsidy has continued to rise. To retain the pump price at between N165 and N170 per litre, the cost of subsidizing the commodity has continued to rise.

SBM Intelligence reports that in the last five years, while petrol prices have only increased by 12.1%, subsidy has gone up by 890% and transport cost of the commodity has increased by 283%.