By Capital Watch Media.
The Federal Government could spend around N236 billion per month to subsidise Premium Motor Spirit (PMS), commonly known as petrol, imported by the Nigerian National Petroleum Company (NNPC) and supplied by Dangote Petroleum Refinery.
On Monday, Alhaji Aliko Dangote, President and CEO of Dangote Group, urged the government to end fuel subsidies entirely, a position supported by the Independent Petroleum Marketers Association of Nigeria (IPMAN) and the Centre for Promotion of Public Enterprise (CPPE) on Tuesday.
It was revealed that members of the Major Oil Marketers Association of Nigeria (MOMAN) lifted over 50 million litres of PMS from Dangote Refinery in the past week. Based on the costs provided by major oil marketers, NNPC is currently selling petrol to marketers at a subsidised rate of N766 per litre, even though it purchases the product from Dangote at N898 per litre. This reflects a subsidy of N132 per litre.
Dangote commenced PMS supplies to the domestic market on September 15, 2024, with a daily output of 25 million litres. This means the NNPC is shouldering a daily subsidy of approximately N3.3bn, which could total N99bn monthly.
For imported petrol, the latest figures from the Nigerian Midstream and Downstream Petroleum Regulatory Authority show that Nigeria consumes about 45.7 million litres daily. With Dangote Refinery supplying 25 million litres, about 20.7 million litres would need to be imported to meet demand.
In July, MOMAN reported that the landing cost of imported PMS was N1,117 per litre, with NNPC selling to IPMAN members at N895 per litre. This indicates a subsidy of N222 per litre for imported petrol, resulting in an additional daily cost of N4.59bn and N137.86bn in 30 days.
Combining the estimated N99bn subsidy on Dangote petrol and the N137.86bn subsidy on imported petrol, the government may spend about N236.86bn monthly on PMS subsidies.
During his interview in New York, Dangote called for an end to the subsidy regime, stating, “Subsidy is a very sensitive issue. Once you are subsidising something, people will inflate the price, and the government will end up paying more than it should. Now is the right time to remove subsidies.”
PMS Consumption in Nigeria
Nigeria’s PMS consumption has been a subject of debate due to conflicting reports from various agencies. NNPC reported average daily consumption of 64.14 million litres in early 2022, while the Nigerian Midstream and Downstream Petroleum Regulatory Authority recorded 66.8 million litres in September 2022. Following the subsidy removal in May 2023, consumption dropped from 69.54 million litres daily in May to 45.74 million litres by July.
The sharp decline in PMS consumption raises questions about whether the decrease reflects genuine consumption or a reduction in smuggling, which is estimated at 15.6 million litres daily.
IPMAN and Expert Reactions
IPMAN’s National Publicity Secretary, Chief Chinedu Ukadike, acknowledged the high cost of petrol, questioning whether subsidies still existed. Dr. Muda Yusuf, Director of CPPE, warned of the unsustainability of the subsidy system, highlighting that Nigeria might be subsidising other nations in the region due to price discrepancies.
Yusuf urged Nigerians to understand the complexities of the current situation, emphasizing that a complete subsidy removal is fiscally necessary. He expressed hope that as local refineries, including Dangote’s, ramp up production, the energy landscape would stabilize.
MEMAN Lifts 50 Million Litres
MOMAN members lifted over 50 million litres of PMS from the Dangote refinery since its initial sale on September 15. Huub Stokman, Chairman of MEMAN, confirmed the loading process, adding that these developments signify Nigeria’s transformation into an African refining hub.
