In a surprising turn of events, the Federal Government of Nigeria has been accused of secretly paying an undisclosed amount to petroleum marketers to maintain the current pump price of petrol, despite the removal of subsidy and a substantial price increase of over 400%. This revelation comes just weeks after President Bola Tinubu announced the end of the era of subsidy payment on petrol.
President Tinubu’s inaugural speech on May 29, 2023, marked the beginning of the removal of fuel subsidy and subsequently led to a significant increase in the pump price of petrol from N189 to around N500 per litre. Presently, due to foreign exchange fluctuations and the product’s exclusive importation, petrol is being sold for prices ranging from N568 to N617 across different regions of the country.
However, sources suggest that the government is discreetly subsidizing the product to maintain the current pump price. It is reported that the ex-depot price of petrol in Lagos is N580 per litre, and considering other costs involved, it should ideally be sold between N620 and N630 per litre. The difference between the actual price and the potential price represents the alleged subsidy that the government is bearing, even though there is no budget allocation for it.
Unnamed insiders claim that the government’s decision to secretly subsidize petrol comes from concerns over negative public reactions to its economic policies, the surge in the cost of living, and potential civil unrest. These sources indicate that the government is worried about losing credibility and goodwill, particularly due to the impact of its policies on the citizens.
Amidst these allegations, the National Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Chief John Kekeocha, asserts that the government’s actions indicate the return of fuel subsidy. Kekeocha points out that when the government fixes the pump price and makes retailers sell within a certain range, it essentially amounts to a form of subsidy.
To counter these concerns, the NNPC recently secured a $3 billion crude repayment loan to stabilize the exchange rate and reduce fuel costs. If the naira appreciates, the cost of fuel is expected to decrease, potentially alleviating the need for further subsidies.
While the government’s position on fuel subsidy remains ambiguous, industry experts and insiders continue to debate whether the current situation indeed represents a return of subsidies or if there are more complex economic factors at play.