Inside Story Reveals FG’s Strategy of Using Crude Oil Sales to Cover Petrol Subsidy Costs

In an exclusive report, it has been revealed that the Federal Government, through the Nigerian National Petroleum Company Limited (NNPC Ltd), is discreetly spending a staggering N17.72 billion daily to sustain petrol subsidies. This revelation comes amidst soaring landing costs, with some marketers pegging it above N1,000 per litre.

According to reliable sources within the petroleum industry, the subsidy funding mechanism involves using proceeds from crude oil sales and direct cost recovery by NNPC. This revelation sheds light on the government’s efforts to keep petrol prices stable despite increasing economic challenges.

Petroleum marketers have highlighted the discrepancy between the landing cost of imported petroleum products and the effective wholesale price, which necessitates government intervention to cover the difference. With Nigeria relying entirely on imported petrol, the daily consumption stands at approximately 44.3 million litres, further exacerbating the subsidy burden.

Despite President Bola Ahmed Tinubu’s declaration in May 2023 that petrol subsidies had ended, pump prices have continued to climb, reaching unprecedented levels. The current pump prices range from over N600 per litre, with some areas even witnessing prices as high as N750 per litre.

Efforts to obtain official data from the Finance Ministry and NNPC have been met with resistance, as both entities have refrained from disclosing crucial information regarding petrol import prices and subsidy expenditures. This lack of transparency raises concerns about accountability and public trust.

Petroleum marketers have attributed the surge in petrol prices to the significant depreciation of the Naira against the Dollar, which has inflated the cost of imports. They emphasize that the government’s intervention to maintain stable pump prices indicates the existence of subsidies, contrary to official statements.

Financial experts and analysts have also weighed in, highlighting the apparent return of petrol subsidies and expressing concerns over the violation of the 2024 Appropriation Act, which did not allocate funds for subsidy payments. They emphasize the importance of transparency in the oil and gas sector to ensure public trust and accountability.

As the debate over petrol subsidies continues, stakeholders urge the government and NNPC to provide clarity and transparency regarding subsidy expenditures and fuel distribution costs to restore public confidence and address the challenges facing the petroleum industry.