The National Bureau of Statistics (NBS) has revealed a dramatic surge in the average retail price of petrol in Nigeria, reporting a figure of N769.62 per liter in May 2024. This represents a staggering 223.21% increase from the N238.11 per liter recorded in May 2023 and a 9.75% rise from April 2024’s price of N701.24.
The significant hike follows the removal of petrol subsidies by President Bola Tinubu on May 29, 2023.
The NBS report, titled “Premium Motor Spirit (Petrol) Price Watch (May 2024),” highlights substantial regional variations in petrol prices across Nigeria. Jigawa State reported the highest average retail price at N937.50 per liter, followed by Ondo and Benue States, with N882.67 and N882.22 per liter, respectively. In contrast, Lagos, Niger, and Kwara States experienced the lowest average prices at N636.80, N642.16, and N645.15 per liter, respectively.
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On a zonal level, the North-West Zone had the highest average retail price of N845.26 per liter, whereas the North Central Zone recorded the lowest at N695.04 per liter.
The removal of petrol subsidies has significantly impacted inflation rates in Nigeria. According to the NBS, the inflation rate surged to 33.95% as of May 2024, with food inflation soaring to 40%. There is concern that this economic strain will further be compounded as the rising landing cost of Premium Motor Spirit (PMS) further impacts the price of goods and services, weighing further down on the government’s ability to subsidize PMS.
Findings reveal that the landing cost of PMS increased by 46.8% year-on-year to N1,026.71 per liter in May 2024, up from N545.83 per liter in May 2023. This landing cost does not include additional charges such as deport-related fees, transportation logistics, and marketers’ margins, bringing the total delivery cost at filling stations to nearly N1,052.39 per liter, assuming an exchange rate of N1,510 to a dollar.
The Weight of Subsidy Payments Amidst Government’s Financial Struggles
Despite the government’s official stance of having removed petrol subsidies, the current pricing strategy indicates otherwise. The Nigerian National Petroleum Company Limited (NNPCL) continues to sell petrol at approximately N568 per liter at its retail outlets, a significant markup from the N238 per liter price of May 2023. Compared to the N1,052.39 per liter landing cost, there is a discrepancy suggesting that the government is effectively subsidizing petrol to the tune of over N400 per liter to maintain current pump prices.
The Dangote Refinery Challenge
A key part of Nigeria’s strategy to manage fuel subsidies was the operation of the Dangote Refinery, which was anticipated to significantly curtail the need for imported petrol and thus reduce subsidy payments. However, the refinery’s potential has been undermined by insufficient crude oil supply.
The NNPC, which holds a 20% equity stake in the Dangote Refinery, is required to provide a sufficient amount of crude oil. Still, Nigeria’s overall poor oil production has hindered this process. The refinery is struggling to secure the crude needed to operate at full capacity, delaying its ability to impact the subsidy situation meaningfully.
The Government’s Dilemma
The Nigerian government faces a challenging dilemma. On the one hand, the continued payment of petrol subsidies is financially untenable given the country’s heavy reliance on loans to fund its operations. On the other hand, the complete removal of these subsidies risks triggering widespread civil unrest.
The economic hardship following the subsidy removal has been profound, with many Nigerians facing increased living costs without a corresponding increase in income.
For many Nigerians, the spike in petrol prices has translated directly into higher costs for transportation, food, and other essentials. Businesses are also feeling the pinch, with increased operational costs leading to higher prices for consumers. The inflationary pressures have eroded purchasing power, leaving many families in a precarious financial situation.
How Much Longer Can the Government Pay?
The ongoing subsidization of petrol raises critical questions about the sustainability of such financial practices. With Nigeria’s government heavily reliant on loans to sustain its operations, the economic feasibility of continuing these subsidies is under scrutiny.
Against this backdrop, many Nigerians are increasingly concerned about how much longer the government can afford to subsidize petrol amidst escalating economic pressures and declining oil revenues.