Fuel Subsidy removal In Nigeria

The new Nigeria president has changed the crude oil and gas sector into another level by removing the fuel subsidy

In its most basic sense, a fuel subsidy is a type of government intervention that lowers the price of fuel by providing direct financial support to oil corporations, which in turn lowers the price of the product for consumers.

With production estimated to be between 1.5 and 2 million barrels per day, Nigeria is one of the continent's top producers of crude oil.

The withdrawal of fuel subsidies was announced, and the oil and gas industry has already felt the effects.

Many gas stations closed down shortly after the announcement in order to conserve stock and sell at the new price after the subsidy termination.

While some gas stations purposefully stockpile the goods, others sell at N350, N400, or N500 per litre. The substance is reportedly selling for as much as N600 per litre in some regions of the south.

Although the federal government, through the Nigerian Midstream and Downstream Petroleum Regulatory Authority, has advised that such is not necessary, Nigerians have resorted to panic paying.

However, when the subsidy is eventually eliminated by June 30, it will have a knock-on effect on other areas of the economy: transportation costs will go up, food prices will go up, and this could even exacerbate inflation.

The government intends to offer social interventions to help disadvantaged Nigerians because of this.

The administration of former President Muhammadu Buhari claimed that the World Bank had approved a $800 million loan to this end.

What is the price of a liter of fuel?

In November of last year, Mr. Mele Kyari, the Group Chief Executive Officer (GCEO) of the Nigerian National Petroleum Company Limited, said that the landing cost of Premium Motor Spirit (PMS), more commonly known as gasoline, was N510 per litre.

This implies that the government is subsidizing up to N315 on each litre of PMS at the present price of N195 per litre sold by big marketers.

However, it is anticipated that the product will retail for as much as N450 to N500 per litre in important filling stations and could even be higher in other black market outlets given the recent announcement of the suspension of fuel subsidies.

Fuel subsidies have already been eliminated, and the whole oil and gas industry has been completely deregulated for efficiency under the Petroleum Industry Act (PIA). However, because the withdrawal of gasoline subsidies was put on hold by the exiting administration until June 2023, implementation has not yet begun.

Up until June 30th, 2023, a total of N3 trillion was allocated for fuel subsidies.

However, experts contend that it would free up funds for the development of important economic sectors.

Nigeria invests a significant amount of money in fuel subsidies. According to reports, the federal government uses around 95% of its revenue to pay down debt.

The result of this change of situation is always more hardship to Nigerians. Once transport increases, everything rockets up in price. I hope people gets used to this as usual.