The Federal Government of Nigeria has denied claims that it has reintroduced the petrol subsidy regime. The government clarified that the recent queues observed at petrol stations across the country were due to distribution challenges, not a lack of supply.
This statement comes in response to concerns raised by oil marketers, organized labor groups, and experts who believed that the government had reinstated the fuel subsidy, despite previous announcements indicating its removal.
Mele Kyari, the Group Chief Executive Officer of the Nigerian National Petroleum Company (NNPC) Limited, emphasized that there is no fuel subsidy in place. President Bola Tinubu had in May announced the removal of the subsidy, and this clarification seeks to reaffirm that stance.
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The fuel subsidy issue has been a contentious one in Nigeria, with the government making efforts to eliminate it as part of broader economic reforms. The recent distribution challenges have led to temporary disruptions in the supply chain, causing queues at petrol stations. The government’s position is that these challenges are not indicative of a return to the subsidy regime.
“I told you there’s no subsidy whatsoever, we are recovering our full cost from the products that we import. We sell to the market, we understand why the marketers are unable to import. We hope that they do this very quickly and these are some of the interventions the government is doing. There is no subsidy,” Kyari said.
The stability of the pump price of petrol in Nigeria despite rising oil prices and the continuous fall of the naira in the FX market indicate that the government is silently paying subsidy.
Last Friday, the National President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Festus Osifo, said that the Nigerian government has restored the subsidy on petrol.
“The speculation has been there looking at the fundamentals because two basic things that contribute to the pricing today are the exchange rate and the price of the crude in the international market.
“You know, in the last few weeks, the price of crude has been going up, and inches towards $95 per barrel. Based on this, there are speculations that there may be an increase in the price of Premium Motor Spirit (PMS) but behind the scenes, we have been engaging the government and trying to make them understand that there is no basis for that.
“Because for us, you know when they floated the exchange rate, you would recall that the exchange rate was moving at a very fast speed before some interventions came,” Mr Osifo said.
Kyari triggered the latest conclusion with his statement on Monday: “We are the only company importing petrol into the country. None of them can do it today. For them, access to foreign exchange is difficult. We create foreign exchange (FX), therefore we have access to FX, while their access to FX is limited.”
The removal of fuel subsidy means that the right to solely import petroleum products has been taken away from the NNPC Limited, allowing petrol marketers to apply for import licenses from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).
The deregulation is expected to drive, among oil marketers, competition that will determine fuel prices. Against this backdrop, Kyari’s statement that the NNPC Limited is back to being the sole importer of petrol is seen as an acknowledgment that fuel subsidy is back.