Nigeria Records national average of N770.54 per liter in Petrol prices in July, Indicating Reduced Subsidy Payments

The Premium Motor Spirit (petrol) Price Watch Report for July 2024, released by the National Bureau of Statistics (NBS), shows a notable rise in petrol prices across Nigeria’s geopolitical zones, with the North West zone registering the highest retail price at N820.10 per liter.

This increase surpasses the national average of N770.54 per liter, marking a 28.35% year-on-year increase and a 2.72% rise from the previous month of June 2024.

While these price hikes indicate broader market shifts, they also signal a critical development: the Nigerian government appears to be reducing the subsidies it has traditionally paid to keep petrol prices low. This shift comes amidst growing fiscal challenges as the country faces significant pressure on its revenue generation capacity, which has been declining steadily over recent years.

Reduction of Fuel Subsidies

Historically, Nigeria has maintained a system of petrol subsidies to reduce the impact of global oil price fluctuations on consumers. The tradition has continued, even though President Bola Tinubu announced last year that “fuel subsidy is gone.”

However, the increases in pump prices across the country indicate that the government is scaling back on these subsidies, leaving consumers to bear more of the costs directly. The petrol prices in July 2024 reflect this trend, particularly in regions like the North West, where prices saw a 9.54% month-on-month increase and a 32.02% rise from July 2023, according to the NBS.

The government’s gradual withdrawal from fuel subsidy payments aligns with broader economic reforms, driven by the country’s struggling revenue base and a desire to redirect the country’s spending on developmental projects. Subsidy payments have long been a contentious issue in Nigeria, draining billions from the treasury that could otherwise be allocated to infrastructure, health, and education.

The pressure to rein in spending has become more acute due to the sharp decline in government revenue, largely attributed to lower-than-expected oil production, oil theft, and rising oil prices that have reportedly forced the current government to spend more on fuel subsidies in one year compared to the previous administration.

Nigeria, as a major oil-producing nation, derives a major portion of its revenue from the sale of crude oil.

With global oil prices once again on the rise and the government scaling back its subsidy payments, which reportedly gulped N833.68 billion in April, petrol prices in Nigeria are expected to increase further in the coming weeks. The government’s inability to afford the subsidies—coupled with international oil market fluctuations—suggests that Nigerians should brace for higher fuel costs.

The NBS report already shows that regions like the North East and South East have seen substantial increases, with petrol prices in the North East averaging N815.34 per liter, a 10.72% rise from June 2024, and the South East recording N786.78 per liter, which, despite a slight month-on-month decline, marks a 25.69% year-on-year increase.

Economists have warned that these rising fuel costs are likely to contribute to higher inflation, as businesses that rely on transportation and energy will face increased operating costs, which could be passed on to consumers. The July 2024 average petrol price of N770.54 per liter reflects a sharp 2.7% rise from June 2024, highlighting the persistent upward trajectory of fuel prices as the subsidy reduction takes effect.

In the South-South zone, which recorded the lowest petrol price in July 2024 at N678.30 per liter, this was still 20.07% higher than prices in July 2023. Additionally, with states such as Katsina, Jigawa, and Benue recording the highest petrol prices in July 2024 (averaging between N846.95 and N950 per liter), the burden of fuel costs is expected to be felt more intensely in the northern regions, potentially leading to increased social discontent.

The current trends suggest that Nigerians will continue to feel the economic strain as the government shifts away from its subsidy regime, and the country’s petrol market becomes more exposed to the fluctuations of global oil prices.

Monthly Price Fluctuations (July 2023 – July 2024)

The NBS report also provided a month-by-month breakdown of petrol price changes over the last 12 months. These figures reveal a steady rise in petrol prices from July 2023 to July 2024, with significant increases during certain months, particularly May 2024, which saw a 9.8% spike in prices, likely due to the removal of fuel subsidies and other economic reforms.