Recent revelations suggest that the Federal Government, via the Nigerian National Petroleum Company Limited (NNPC Ltd), is currently spending approximately N17.72 billion daily to subsidize petrol. Despite the opacity surrounding the funding strategy, it is understood that this subsidy is facilitated through crude sales and direct cost recovery by NNPC.
According to a top executive at a major petroleum marketing company in Lagos, this subsidy cost covers the variance between the landing cost of imported petroleum products and the effective wholesale price to petroleum marketers. Nigeria relies entirely on imported petrol, with daily consumption estimated at around 44.3 million litres.
At current average depot prices and exchange rates, it is estimated that the FG, through NNPC, may be incurring losses or revenue shortfalls of about N531 billion monthly. These figures have begun to manifest in the monthly reports of the Federation Account Allocation Committee (FAAC).
This substantial subsidy expenditure contrasts sharply with President Bola Ahmed Tinubu’s declaration on May 29, 2023, that petrol subsidies had been abolished. Despite this declaration, petrol prices have continued to rise, with NNPC retailing at N617 per litre in Abuja, and independent and major marketers selling at even higher prices, reaching up to N750 per litre in some regions.
Efforts to obtain official data from the Finance Ministry on petrol import prices have been rebuffed, and regular FAAC breakdowns by NNPC have been removed from public communications. NNPC has also declined to release its petroleum import information, citing its status as a private company.
Petroleum marketers argue that the current landing price of petrol exceeds N1,000 per litre, attributing this increase primarily to the depreciation of the Naira against the US Dollar. The failure to adjust petrol prices in line with market realities has led to suspicions that the government is subsidizing petrol prices.
Experts and analysts believe that the government’s decision to subsidize petrol may be driven by fears of political and social backlash if the full cost of imported petrol were passed on to consumers. However, this subsidy funding is not provided for in the 2024 Appropriation Act, raising concerns about fiscal responsibility and adherence to budgetary provisions.
Despite NNPC’s assertion of being a private company, there are calls for greater transparency in its operations, particularly regarding subsidy payments and fuel distribution costs. The lack of transparency undermines public trust and raises questions about the government’s motives in subsidizing petrol prices.
