FG may pay N1.68tn fuel subsidy, as marketers forecast N900/litre

The federal government may spend about N1.68tn as subsidy on Premium Motor Spirit, popularly called petrol, from September to December this year, an analysis of data provided by oil marketers and the sector has shown.

According to PMS dealers, the pump price of petrol should be between N890 and N900 per litre given the depreciation of the naira against the US dollar and the rise in the price of petroleum on the world market on Thursday.

Depending on the location, petrol currently costs between N598 and N617 per litre, which feeds rumors that the Federal Government is subsidizing the commodity.

Neither the government nor the NNPCL have officially admitted that subsidy on petrol has been reintroduced. President Bola Tinubu had on May 29 announced the end of the subsidy regime during his inaugural address.

The government subsidises petrol through the Nigerian National Petroleum Company Limited. NNPCL is the sole importer of petrol. Other marketers stopped importing petrol because of their inability to access foreign exchange.

The removal of subsidy caused an hike in the pump price of petrol from about N198/litre in May to the current price of N617/litre. However the decline of the naira and the rise in crude oil prices have continued to mount pressure on the cost of PMS.

Over 80% of the cost of PMS, according to dealers in the downstream oil sector, may be attributed to the price of crude oil and the naira-dollar exchange rate.

Brent crude, the global benchmark for oil, rose to about $95/barrel on Thursday. It had peaked at $97/barrel the preceding day, which was the highest figure in 2023.

Oil had started the year at about $82/barrel, dipped to $70/barrel in June, but traded above $94/barrel in the past week.

Also, on Thursday the naira continued its downward trend after exchanging to the dollar at 980 on the parallel market on Wednesday.

A week earlier, the naira was exchanged for the dollar at 950/$.