The Federal Government has officially denied reports of reinstating fuel subsidies, despite the closure of many filling stations nationwide due to challenges in the downstream oil sector. The government’s statement also clarified that the long queues observed at petrol stations are not due to a lack of supply but are instead caused by distribution issues from the South to the North of the country.
The Nigerian National Petroleum Company Limited (NNPCL) also announced on Monday that it would have faced bankruptcy by June 2023 if not for President Bola Tinubu’s decision to halt fuel subsidies in May.
The NNPCL further revealed that Nigeria is on track to become a net exporter of refined petroleum products by next year, as efforts are underway to revamp the country’s refineries.
The Group Chief Executive Officer of NNPCL, Mele Kyari, stated unequivocally that fuel subsidies have not been reintroduced. He explained that the company is recovering its full costs from the products it imports, emphasizing that there is no subsidy in place.
Kyari’s assertion came in response to earlier statements by oil marketers and reports from the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) confirming the return of fuel subsidies. Oil marketers had indicated that the landing cost of petrol had reached N720 per litre, while it was being sold between N580 and N617 per litre.
Addressing the situation, Kyari stated that the existence of subsidies had historically stifled growth in the downstream sector of the petroleum industry. He mentioned that there are currently around 25 licenses for building and operating refineries in Nigeria that have remained unused due to subsidies on refined petroleum products, particularly Premium Motor Spirit (PMS).
He emphasized that subsidies should have been removed since February 2022 as per the provisions of the Petroleum Industry Bill, but the National Assembly had intervened and requested their continuation until June 30, 2023.
Kyari also noted that while there is no accurate figure for petrol consumption in Nigeria, the removal of subsidies had resulted in a 30% drop in the volume of PMS evacuated from depots.
Regarding the challenges faced by oil marketers in accessing foreign exchange, Kyari revealed that NNPCL is working to address these issues and ensure the supply of forex into the market.
In an effort to mitigate the impact of high fuel prices, NNPCL is promoting Compressed Natural Gas (CNG) as an alternative to petrol, which can help alleviate pressure on petrol demand.
The ongoing efforts to revamp the country’s refineries are part of the broader strategy to reduce Nigeria’s reliance on fuel imports and promote self-sufficiency in petroleum product production. However, Kyari cautioned that the cost of petroleum products may not drop significantly, as speculated by some.
In conclusion, the Federal Government’s denial of the reintroduction of fuel subsidies highlights the complexities and challenges in Nigeria’s downstream oil sector. While the government seeks to address these issues, the country continues to grapple with the impact of high fuel prices and supply disruptions.