Fuel Subsidy Removal to Cost Nigerians N8.4tn in Second Half of 2023

The Federal Government’s plan to end the subsidy on Premium Motor Spirit (PMS), commonly known as petrol, in June 2023 is set to cost Nigerian consumers an estimated N8.4tn between July and December of the same year.

According to industry data, this represents a significant increase of about 250% from the N2.4tn that PMS consumers would have spent during the same period if the subsidy regime was retained.

Oil marketers have explained that should fuel subsidy be brought to an end as projected by the Federal Government, the average cost of petrol could rise to about N700 per litre from July. This means that the cost of fully deregulated petrol could rise by N6tn during the six-month period.

The Group Chief Executive Officer of the Nigerian National Petroleum Company Limited, Mele Kyari, had earlier stated that over 66 million litres of PMS was pumped daily into the market by the NNPC Limited to keep the country supplied.

However, the President of the Petroleum Products Retail Outlets Owners Association of Nigeria, Billy Gillis-Harry, warned that if the refineries were not working, and Nigeria continued to depend on imports, the price of petrol might rise even higher than the projected N700 or N750 per litre.

He explained that the landing cost, logistics, overheads, profit, and other factors could drive the price up to around N800 per litre. If the dollar is accessed at the black market rate, then the average price of N700 per litre could double, reaching between N1,400 to N1,700 per litre.

Gillis-Harry emphasized the need for Nigeria to get its refineries working to reduce the country’s dependence on imports and stabilize petrol prices. He argued that the deregulation of the downstream oil sector needed to be a gradual process to avoid negative impacts on consumers.

Experts have also called on the Nigerian government to increase local refining capacity to reduce the country’s dependence on imported petrol and cushion the effects of subsidy removal on consumers.

As the debate on fuel subsidy removal continues, Nigerians brace themselves for the looming increase in petrol prices, which is expected to have a significant impact on their daily lives and the country’s economy as a whole.