The Federal Government has saved approximately N400 billion as a result of the removal of the subsidy on Premium Motor Spirit, commonly known as petrol.
According to The PUNCH, this was disclosed through a press statement made by oil marketers on Thursday.
Also as a result of the Federal Government’s recent decision to float the naira against the U.S. dollar, the oil dealers stated that there was a high likelihood that the price of unleaded would increase in July.
On June 14, 2023, the Central Bank of Nigeria centralised the country’s exchange rates under the Investors and Exporters window, permitting the market to determine the exchange rate.
Operators in the downstream oil industry claim that since ending the subsidy regime in May, Nigeria has saved hundreds of billions of dollars based on information provided by the Nigerian National Petroleum Company Limited about the amount that was previously spent on subsidies every month.
“Right now they (the government) are making money. At least with this removal of subsidy, the government has racked in hundreds of billions, whether in naira or dollar. This is because every month we know how much they lose before,” the National President, Independent Petroleum Marketers Association of Nigeria, Chinedu Okonkwo, stated.
He stated that marketers had been told how much the NNPCL was spending on subsidy monthly, referring to the comments of the firm’s Group Chief Executive Officer, Mele Kyari, during a meeting with oil sector operators in February.
At the meeting, Kyari had said, “Today, by law and the provisions of the Appropriation Act, there is a subsidy on the supply of petroleum products, particularly PMS imports into our country. In current data terms, three days ago, the landing cost was around N315/litre.
“Our customers are here; we are transferring to each of them at N113/litre. That means there is a difference of close to N202 for every litre of PMS we import into this country. In computation, N202 multiplied by 66.5 million litres, multiplied by 30 will give you over N400bn of subsidy every month.”
Okonkwo added that the oil dealers were conducting talks about petrol importation by independent marketers.
“We are holding meetings with a lot of people who are interested in commencing PMS imports. We are not resting on our oars about this,” the IPMAN president stated.
Okonkwo maintained that the withdrawal of the subsidy would not just result in a constant rise in the price of PMS, even if he conceded that the price of petrol would rise in reaction to changes in foreign exchange values.
“When there is deregulation and no subsidy, the price of petrol would either go up or come down. If you want to profiteer, those who bring in and sell at cheaper rates would put you out of business.
“So the market fundamentals will determine the pricing and capping. Therefore the floating of the naira at this time that Nigeria is beginning to make savings is not going to be a fixed thing,” he stated.
The IPMAN president added, “The exchange rate will also move up or down depending on how we manage our crude oil, which is our foreign exchange earner. By the time we begin to meet our OPEC quota and other areas of generating foreign exchange, the naira will begin to firm up.
“And this will result in cheaper fuel. So we should not be thinking that the cost of fuel will continue to rise. The floating of the naira is good because at the previous level, you only access the dollar at the official rate based on who you know.”
Also, the President, Petroleum Products Retail Outlets Owners Association of Nigeria, Billy Gillis-Harry, said,“So long as the exchange rate is high, the cost of petrol will be high. But these are early days and the expectation with the President Bola Tinubu-led government is that the exchange rate will be getting lower. So we will get there,” he stated.
