Naira Depreciation and Economic Tensions Fuel Dispute
In a heated confrontation, the Nigerian National Petroleum Company Limited (NNPCL) and fuel marketers, represented by the Independent Petroleum Marketers Association of Nigeria, found themselves at loggerheads once again over the contentious issue of fuel subsidy removal. This dispute unfolded against the backdrop of the ongoing depreciation of the naira against the United States dollar in both the official Investors & Exporters Window and the parallel market.
As of Tuesday, the local currency concluded at 998 naira/dollar in the official market, while trading at 1,225 naira/dollar in the black market, accentuating concerns about the economic implications. Economists and oil marketers argued that the subsidy on Premium Motor Spirit (PMS) had been escalating due to the falling naira rate. Contrarily, NNPC rebuffed these claims, asserting that it was recouping its full importation costs for petrol.
Economists and Marketers Diverge on Subsidy Status
Chief Executive Officer of Financial Derivatives Company, Bismarck Rewane, clarified on a live television program that the fuel subsidy had not been entirely removed but rather reduced. Oil marketers echoed the sentiment that petrol subsidy was on the rise, advocating for a free market price of N1,200/litre, given the adverse impact of the naira devaluation and crude oil costs. Presently, petrol, solely imported by NNPCL, sells for varying prices between N617/litre to N660/litre across Nigeria.
NNPCL and Government’s Stance
Despite mounting contentions, NNPC’s Chief Corporate Communications Officer, Olufemi Soneye, dismissed claims by economists and marketers as mere assumptions. Soneye insisted that the Federal Government had definitively ceased subsidizing petrol. President Bola Tinubu’s announcement on May 29, 2023, signaling the end of petrol subsidy, was promptly implemented by NNPCL the following day. Consequently, petrol prices surged from below N190/litre to over N500/litre and eventually exceeded N600/litre within weeks.
Divergent Views on Subsidy Reduction
Bismarck Rewane reiterated that the subsidy on petrol was reduced, not eliminated, emphasizing the resultant impact on consumers’ income. The Independent Petroleum Marketers Association of Nigeria projected that in a free market, petrol should be priced around N1,200/litre, considering international factors and the devalued naira. The association, however, expressed optimism for price reduction once domestic refineries, particularly the Port Harcourt and Dangote facilities, become operational.
Social and Economic Considerations
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, acknowledged a partial subsidy on petrol, emphasizing the government’s retention for social, economic, and political reasons. Yusuf maintained that a delicate balance was necessary to avoid exacerbating economic hardship. The World Bank, in December, insisted that the subsidy persisted, projecting a minimum cost of N750/litre without government intervention.
Naira’s Woes Continue
Amid these economic debates, the naira faced further challenges, closing at N988.46/$ in the Investors and Exporters Window. This marked a 8.97% decline from the previous trading day, reflecting the ongoing struggles of the national currency. The World Bank urged increased FX supply and monetary policy tightening to stabilize the naira.
NNPCL Battles Crude Oil Theft Surge
Simultaneously, the Nigerian National Petroleum Company Limited reported a surge in crude oil theft in the Niger Delta, recording 112 cases within a week. The incidents included the discovery of 42 illegal refineries and 14 illegal connections in various locations. The company vowed to intensify efforts against oil theft, a menace causing significant revenue losses for Nigeria