Fuel Crisis: Oil Marketers Project N700bn Monthly Subsidy

The monthly subsidy on Premium Motor Spirit (PMS), commonly known as petrol, has surged to approximately N707 billion, according to projections by oil marketers. The increase is attributed to the landing cost of petrol reaching N1,117 per litre.

In response to the ongoing crude oil supply crisis and regulatory challenges, the Dangote Petroleum Refinery, set to commence petrol production in August, is considering exporting its products. The $21 billion refinery is facing difficulties in securing crude oil supplies from local and international sources.

On Monday, Heineken Lokpobiri, Minister of State for Petroleum Resources (Oil), convened a meeting with officials from Dangote refinery, the Nigerian National Petroleum Company Limited (NNPC), the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) in Abuja to address these issues.

Additionally, the House of Representatives has established an investigative committee to probe the shortage of crude oil for domestic refineries and allegations of profiteering through price hikes.

The Major Energy Marketers Association of Nigeria (MEMAN) recently reported a landing cost of N1,117 per litre for petrol, with the Independent Petroleum Marketers Association of Nigeria (IPMAN) asserting that the Federal Government continues to subsidise PMS. This subsidy is seen as unsustainable and likely to lead to increased pump prices soon.

The disparity between the landing cost and the ex-depot price of N585 per litre indicates a substantial subsidy of N532 per litre. Nigeria’s daily petrol consumption varies, with recent figures suggesting around 44.3 million litres per day, resulting in a daily subsidy expenditure of N23.57 billion and a monthly total of approximately N707 billion.

IPMAN representatives argue that the current pricing structure contradicts the government’s claims of subsidy removal, calling for full deregulation of the downstream sector to foster competition and reduce prices. The NNPC, however, maintains that it is no longer subsidising petrol.

The Dangote refinery’s potential export of petrol is driven by the high costs of importing crude oil from the United States, making local sales less viable compared to international markets. Dangote Industries Vice President of Oil and Gas, Devakumar Edwin, highlighted challenges in securing crude oil from International Oil Companies (IOCs), leading to increased production costs.

The Speaker of the House of Representatives, Tajudeen Abbas, has tasked a committee with investigating the quality and cost of imported petroleum products, ensuring compliance with global standards.

In an effort to resolve the ongoing issues, Minister Lokpobiri’s intervention aims to foster cooperation among stakeholders to support Nigeria’s economic growth and energy security.