After Nigerians believed the first speech by President Tinubu on his inauguration day on 29th May that the subsidy was gone, however finding revealed that the federal government is still paying subsidy through the back door as the sum of N169.4 billion was gulped as subsidy in August, though FG promised to maintain the fuel price at N620 per litre.
Expert have been speculating that with the current price stagnation despite on fuel and the worsening exchange rate and international crude price crossing $95 a barrel suggests a return of subsidy by the federal government.
DailyTrust reports that a document sighted by its correspondent at the Federal Account Allocation Committee (FAAC), yesterday, revealed that in August 2023, the Nigerian Liquefied Natural Gas (NLNG) paid $275m as dividends to Nigeria via NNPC Limited. NNPC Limited used $220m (N169.4 billion at N770/$) out of the $275m to pay for the PMS subsidy. Then NNPC held back $55m, illegally.
The revelation by FAAC effectively indicates that the subsidy is back and NNPC is now taking NLNG dividends to pay the subsidy.
According to oil and gas industry reports conducted by the Nigeria Extractive Industries Transparency Initiative (NEITI), the cost of petrol subsidy from 2015 to 2020 was N1.99 trillion.
Former President Buhari last administration in the country has in the history recorded highest amount paid as subsidy in Nigeria.
Also reports by the Nigerian National Petroleum Corporation (NNPC) to the Federation Accounts Allocation Committee (FAAC), showed that petrol subsidy cost N1.57 trillion in 2021 alone and another N1.27 trillion from January to May 2022.
The government thereafter budgeted of N3 trillion to cover petrol subsidy costs from June 2022 to June 2023.
An aggregation of the entire costs showed that under President Buhari the government spent N7.83 trillion on petrol subsidies.
How FG planned to sustain N620 per litre
The $3 billion crude repayment loan the Nigerian National Petroleum Corporation (NNPC) Limited announced it sealed with the African Export-Import (Afrexim) Bank was designed to equip the federal government with the necessary dollar liquidity to stabilise the Naira.
According to the Otegra Ogra, SSA to President Tinubu, the loan will assist NNPC Ltd. in settling taxes and royalties in advance.
He said, “A strengthened naira as a result of this initiative will lead to a reduction in fuel costs. This means that if the naira appreciates in value, the cost of fuel will drop and further increases will be halted.
However, the loan has reportedly stalled as other lenders that were supposed to be a part of the syndicated transaction are said to have backed out.
“Afrexim was supposed to put down only $250 million which was to help bring on board other lenders as they are already heavily exposed to Nigeria and have obligor limits.
The Central Bank of Nigeria (CBN) gross reserves have not seen accretion to suggest the $3bn has been received. The FX reserve has been down 0.2% to $33.68 billion since the announcement was made on August 16.
National President, Natural Oil and Gas Suppliers Association of Nigeria (NOGASA), Benneth Korie, who had decried the prevailing development in the sector said, “Definitely the price of PMS will go up as much as the dollar price goes up. If you are exchanging $1 for N950, it will go up.”
Another expert, Dr Wisdom O. Mogbolu, said “I have said this repeatedly: we can’t think of removing subsidy without a functional refinery, without the stability of FX. For example, if the price of crude goes up, our petrol price must go up, now coupled with our volatile Fx, we must fix our system not kill the masses.”
The Chairman of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Ejigbo Satellite Depot, Mr Akin Akinrinade, said stabilising the naira in the short term would be important to achieve the promise of the FG.
He suggested that “There are two things that the government can do. The immediate one is the stability of the naira because as the price of dollars goes up, the price of petrol will go up. The government should intervene to ensure the stability of the Naira”. (Dailytrust).