FUEL 1200/Litre : NNPCL, Marketers clash over subsidy

FUEL 1200/Litre : NNPCL, marketers clash over subsidy

In Nigeria, there’s a disagreement between the Nigerian National Petroleum Company Limited (NNPCL) and fuel marketers regarding the removal of subsidy on petrol. This conflict arises as the country’s currency, the naira, loses value against the US dollar.

Here’s a breakdown of what’s happening:

1. Currency Depreciation:
   • The naira has lost value against the US dollar, closing at 998/dollar officially and 1,225/dollar in the black market.
2. Fuel Subsidy Debate:
   • Economists and oil marketers argue that the subsidy on Premium Motor Spirit (PMS or petrol) is increasing due to the falling naira.
   • The NNPCL claims it is recovering its full costs and denies the existence of a subsidy.
3. Government’s Stance:
   • President Bola Tinubu declared the removal of petrol subsidy, and the NNPCL asserts that the government no longer pays a subsidy.
4. Subsidy Reduction vs. Removal:
   • Economists like Bismarck Rewane clarify that the subsidy on petrol was reduced, not removed. They highlight the impact on government revenue and consumers.
5. Market Dynamics:
   • Oil marketers suggest that, considering international factors, petrol should cost around N1,200/litre in a free market.
   • The NNPCL sells petrol between N617/litre to N660/litre, and there are projections for a reduction with the commissioning of new refineries.
6. Social and Economic Factors:
   • The Centre for the Promotion of Private Enterprise emphasizes that subsidy is retained partially due to economic, social, and political reasons.
7. Naira Performance:
   • The naira faces depreciation, with concerns raised about its performance against the US dollar in 2024.
8. Oil Theft and Vandalism:
   • The NNPCL reports numerous cases of crude oil theft, illegal refineries, illegal connections, vandalism, and storage site discoveries in the Niger Delta.
9. Government’s Balancing Act:
   • The government is urged to balance economic gains with social considerations. Full removal of subsidy could lead to higher fuel prices and increased economic hardship.
10. World Bank’s Position:
    • The World Bank insists that there is still a subsidy on petrol, and the cost should not be less than N750/litre without subsidy.
11. Naira Exchange Rate:
    • The naira faces challenges in the foreign exchange market, with a decline of 8.97% against the US dollar.
12. NNPCL’s Efforts Against Oil Theft:
    • The NNPCL reports cases of crude oil theft in the Niger Delta, with ongoing efforts to combat illegal activities.

This situation highlights the complexity of economic decisions, particularly in balancing the removal of subsidies, currency challenges, and efforts to curb illegal activities in the oil sector.