How Tinubu Government Secretly Subsidises Petrol Despite Announcing Removal

The Federal Government of Nigeria has been accused of secretly paying an undisclosed amount to petrol marketers to keep the pump price of the product at the current level, despite announcing the removal of subsidy and the deregulation of the sector in 2023.

President Bola Tinubu, who assumed office on May 29, 2023, had declared that his administration would no longer subsidise Premium Motor Spirit (PMS), also known as petrol, and that the price would be determined by market forces. This led to a sharp increase in the pump price of petrol from N189 to about N500 per litre across the country.

However, according to sources within the Presidency, the government is still bearing some form of subsidy on petrol, as the actual price of the product should be between N620 and N630 per litre, based on the ex-depot price of N580 per litre in Lagos on Thursday. The ex-depot price is the price at which depot owners sell the product to marketers.

The report also cited an official of a fuel marketing firm who said the government is paying a subsidy of about N20 per litre. This means that the government is effectively selling petrol at a price below the cost of production.

The sources revealed that the government decided to peg the pump price of petrol at the current rate to avoid further public outcry and possible civil unrest, as Nigerians are already groaning under the harsh economic conditions caused by the removal of subsidy and the floating of the naira.

The floating of the naira, which was also part of President Tinubu’s economic reforms, has resulted in a significant depreciation of the local currency against major foreign currencies, especially the US dollar. This has increased the cost of importing petrol, as Nigeria relies heavily on importation to meet its domestic demand for the product.

The Presidency sources said that the government was afraid of losing its popularity and credibility among Nigerians, who are feeling betrayed by President Tinubu’s policies and their negative impacts on their standard of living. They also said that the government was wary of provoking widespread protests and agitation from organised labour, civil society and opposition parties, who are already challenging the legitimacy of President Tinubu’s election at the presidential election petition tribunal.

The sources said that the government was trying to stabilise the foreign exchange market and support the naira by securing a $3bn crude repayment loan from AFREXIM Bank on Wednesday.

The loan would enable the Nigerian National Petroleum Corporation Limited (NNPCL) to sell crude oil to AFREXIM Bank in exchange for naira and use the proceeds to fund its operations and import petrol.

The sources added that the government was also exploring other options to reduce its subsidy burden and ensure adequate supply of petrol in the country, such as increasing local refining capacity, encouraging private sector participation and attracting foreign investment in the downstream sector.

The government’s decision to secretly subsidize petrol is a major setback for its economic reform agenda. It also raises questions about the government’s commitment to transparency and accountability.

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