The cost of petrol subsidies in Nigeria has surged to an unprecedented N15.1 trillion under President Bola Tinubu’s administration, eclipsing the total expenditure of his predecessor, Muhammadu Buhari, and raising significant concerns about the country’s fiscal health.
According to calculations done on data from the National Bureau of Statistics (NBS) and petroleum marketers, the amount spent on petrol subsidies over the past 14 months—spanning from June 2023 to July 2024—represents an increase from previous subsidy figures.
The analysis reveals that the current administration’s spending on fuel subsidies has significantly surpassed Buhari’s total expenditure of N10.7 trillion on petrol subsidies from 2016 to mid-2023.
The surge in subsidy spending is attributed to a combination of factors, including the naira’s sharp depreciation and fluctuating international oil prices.
As of August 2024, Nigeria imports between 1.4 billion to 2.5 billion litres of petrol monthly, with an average monthly consumption of 1.95 billion litres.
This consumption has led to a subsidy bill of approximately N15.1 trillion, calculated based on the differential between the landing cost of petrol, which stands at N1,203 per litre, and the retail price of N650 per litre at NNPC stations.
Kelvin Ayebaefie Emmanuel, CEO of Dairy Hills, emphasized the need for transparency in Nigeria’s petrol consumption statistics to address the subsidy issue effectively.
“The first step to addressing the cost of under-recovery on petrol subsidies is finding the actual daily consumption. Additionally, the price of crude oil and the exchange rate are significant factors contributing to the subsidy burden,” he said.
Despite President Tinubu’s initial declaration in his inauguration speech that petrol subsidies would be abolished, the cost has continued to climb.
Analysts attribute the ongoing subsidy payments to the naira’s dramatic devaluation, with the exchange rate soaring from N740 per dollar in June 2023 to N1,592.06 in August 2024.
This drastic currency depreciation has exacerbated the financial strain of subsidizing petrol imports.
Adding to the complexity, NNPC Group CEO Mele Kyari recently claimed that the company no longer pays fuel subsidies.
However, the analysis by BusinessDay contradicts this, highlighting the significant costs borne by the government.
Jide Pratt, COO of AIONA and Country Manager of TradeGrid, criticized the current subsidy regime, stating, “The queues and high prices at filling stations are a testament to the struggles with subsidy payments. The discrepancy between NNPC’s retail price and the landing cost reflects an unsustainable financial burden.”
The subsidy spending has had notable impacts on Nigeria’s economy, including reduced government revenues and increased fiscal pressures.
The Nigerian government has had to adjust its financial strategies, including the use of NNPC’s 2023 dividends to cover subsidy costs and the suspension of 2024 interim dividend payments.
Muda Yusuf, CEO of the Centre for Promotion of Private Enterprise, highlighted the economic implications of continued subsidy payments.
“The high fuel prices and subsidy costs affect government revenues significantly. Until Nigeria ceases fuel imports, the burden of subsidy payments will persist.”