FG Likely To Spend N236bn Monthly On Petrol Subsidy Covering Imports And Dangote Production

FG Likely To Spend N236bn Monthly On Petrol Subsidy Covering Imports And Dangote Production....KINDLY READ THE FULL STORY HERE▶

The Federal Government may incur a monthly expenditure of approximately N236 billion to subsidize Premium Motor Spirit (PMS), commonly known as petrol, imported through the Nigerian National Petroleum Company (NNPC) and sourced from the Dangote Petroleum Refinery…..CONTINUE READING 

On Monday, Alhaji Aliko Dangote, President and Chief Executive of Dangote Group, urged the Federal Government to completely eliminate fuel subsidies. He argued that this move would help accurately gauge the country’s actual petrol consumption. His position was supported by the Independent Petroleum Marketers Association of Nigeria and the Centre for Promotion of Public Enterprise on Tuesday.

It was revealed that the Major Energies Marketers Association of Nigeria (MEMAN) had lifted over 50 million liters of PMS from the Dangote refinery in the past week.

Based on information from major oil marketers regarding the cost of petrol sold to them by NNPC, it was found that the government is subsidizing the product through the national oil company. NNPC reportedly sold petrol to marketers at N766 per liter, even though it had procured it from the Dangote refinery at N898 per liter. This indicates a government subsidy of N132 per liter.

Dangote began supplying PMS to the domestic market on September 15, 2024, with a daily output of 25 million liters. This results in an NNPC subsidy of approximately N3.3 billion per day, or around N99 billion per month, for Dangote-produced petrol.

For imported petrol, the latest figures from the Nigerian Midstream and Downstream Petroleum Regulatory Authority estimate daily consumption at 45.7 million liters. If the Dangote refinery provides 25 million liters daily, about 20.7 million liters would need to be imported to meet domestic demand. The landing cost of imported PMS was reported at N1,117 per liter in July, with NNPC selling it to independent marketers at N895 per liter, implying a subsidy of N222 per liter. For 20.7 million liters, this would amount to N4.59 billion daily, or N137.86 billion over 30 days.

Combining the estimated N99 billion subsidy on Dangote petrol with the N137.86 billion subsidy on imported petrol, the government, through NNPC, may spend approximately N236.86 billion monthly on PMS subsidies.

In an interview in New York, Aliko Dangote reiterated his call for the complete removal of subsidies, citing the need to avoid inflated costs that burden the government. He also highlighted that the operation of his refinery would help clarify Nigeria’s true petrol consumption, which has been a contentious issue.

The country’s PMS consumption has been debated due to varying figures from different agencies. Following the removal of the petrol subsidy in May 2023, daily consumption dropped significantly, with a decrease from 69.54 million liters in May to 45.74 million liters in July.

A major marketer revealed that NNPC has been selling petrol to marketers at N766 per liter, with allocations coming from the Dangote refinery. Marketers have begun lifting petrol under this arrangement, and some, like 11Plc, have confirmed purchasing Dangote petrol at N765.99 per liter from NNPC.

The Executive Vice President of Downstream at NNPC, Adedapo Segun, explained that marketers are not purchasing directly from Dangote because the product is still subsidized. He noted that NNPC remains the primary off-taker as long as the market price for PMS remains higher than the subsidized rate.

Despite varying reports, the Dangote refinery has declined to disclose the exact price at which it sells petrol to NNPC.

The Independent Petroleum Marketers Association of Nigeria (IPMAN) and industry experts have long advocated for the removal of subsidies, citing unsustainable high prices and the burden on the government. Dr. Muda Yusuf, Director of the Centre for Promotion of Public Enterprise, emphasized the difficult but necessary decision by the Federal Government to remove subsidies and urged Nigerians to understand the current PMS prices.

Yusuf explained that factors like the devaluation of the naira and price differences with neighboring countries have made the fuel subsidy unsustainable. He also highlighted the challenges of policing borders to prevent smuggling, which has been incentivized by the disparity in fuel prices across borders.

Yusuf expressed hope that the Dangote refinery and other domestic refineries could help manage the situation better, potentially moderating PMS prices in the future.

Meanwhile, MEMAN members have lifted over 50 million liters of petrol from the Dangote refinery since it began sales on September 15. MEMAN Chairman Huub Stokman confirmed that major marketers had started loading products from the 650,000-barrels-per-day refinery. He encouraged a positive outlook on Nigeria’s refining capacity and emphasized the importance of fair competition and cooperation among stakeholders in the energy sector.