Key highlights
- PENGASSAN President believes that fuel will be sold for less than N500 per liter after the fuel subsidy is removed.
- Other stakeholders have projected N750 to N800 per liter if the fuel subsidy is removed. Either way, Nigerians will have to bear the brunt of increased fuel prices as this will affect food prices and transportation costs
- The incoming administration has said it will prepare social welfare programs to ease the burden of Nigerians along food, transportation, and healthcare lines.
The President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Festus Osifo has said that fuel will be sold for less than N500 per liter after the fuel subsidy is removed. This is according to a statement made after his association’s National Executive Council meeting, which was held on Tuesday, March 28 in the federal capital territory, Abuja.
According to Osifo, the determining factors for the pricing are the Nigerian National Petroleum Company (NNPC) Limited; being the sole importer of premium motor spirit (PMS), and the Central Bank of Nigeria exchange rate. He said:
“Today, the sole importer of PMS into Nigeria is the NNPC. The NNPC is using an exchange rate of the CBN which gives about N400 to N450 depending on the day and depending on the window that you are looking at. So, if you compute that into the model today, PMS should be selling for a region of about N360 to N400.
“While maintaining our support for the full deregulation of the sector and the significant milestone achieved in this regard, we counsel that efforts be made to increase the pace of the current rehabilitation exercise of refineries and get them back on track in due time.”
Contrasting views: However, during a recent webinar with the theme; “Deregulation of the Nigerian Downstream Sector: The Day After”, stakeholders said Nigerians may likely pay up to N750 per liter for fuel after the subsidy is removed. According to these stakeholders, the only way this projected price will drop is if marketers are provided with foreign exchange at the official CBN rate.
Oil and gas analyst, Kayode Oluwadare told Nairametrics that fuel is already sold as high as N250 to N300 per liter, so he believes that when fuel subsidy is removed, such filling stations could sell for up to N750 and N800 per liter. This will further increase the prices of food and transportation, especially for those who live outside major cities like Lagos, Abuja, and Port Harcourt.
Current realities: The Muhammadu Buhari administration has decided to remove fuel subsidies before the end of its tenure on May 29, 2023. Nigeria’s Finance Minister, Dr. Zainab Ahmed has previously noted that it will be better to remove subsidies gradually from the second quarter of 2023, to ease the burden on Nigerians who already are dealing with an inflation rate of 21.91%.
The current president-elect’s plans: In his campaign manifesto, President-elect, Bola Ahmed Tinubu noted that his administration intends to remove fuel subsidies and implement social welfare programs to help Nigerians cope with the removal. For the implementation of these programs, he is targeting transportation, healthcare, education, and water supply. Tinubu also plans to focus on the ongoing rehabilitation of the country’s refineries, so, local refining capacity can further reduce the cost of fuel.
What you should know: Nigeria is steadily increasing its crude oil production. As of February 2023, the country was producing 1.3 million barrels of oil per day.