The Federal Government of Nigeria is projected to spend approximately N1.68 trillion on fuel subsidy for Premium Motor Spirit (PMS), commonly known as petrol, between September and December 2023.

This estimate is based on data provided by oil marketers and industry experts. According to petroleum dealers, the current pump price of petrol, which ranges between N598 and N617 per liter depending on the location, suggests that the government is subsidizing the commodity.

They argue that, given the depreciation of the Nigerian Naira against the US Dollar and the surge in global crude oil prices, the pump price of petrol should be between N890 and N900 per liter.

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Although the government and the Nigerian National Petroleum Company Limited (NNPCL) have not officially confirmed the reintroduction of fuel subsidy, indications point towards it.

President Bola Tinubu had announced the end of the subsidy regime on May 29, but factors such as the weakening Naira and rising crude oil prices have put pressure on petrol prices.

Industry insiders explain that over 80% of the cost of petrol is influenced by the price of crude oil and the exchange rate between the Naira and the Dollar. Brent crude, the global benchmark for oil, recently reached approximately $95 per barrel, with oil prices seeing substantial increases throughout the year.

In addition, the Nigerian Naira has been depreciating, trading at around 980 Naira to the Dollar on the parallel market, compared to 950 Naira a week earlier. Although there has been a slight appreciation of the Naira to 770.71 Naira to the Dollar on the FMDQ Investor & Exporter forex window, the overall forex crisis continues to affect fuel prices.

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As the cost of petrol remains significantly higher than the official price of N617 per liter, oil marketers and experts suggest that the government may be quietly reintroducing fuel subsidy. A media report indicated that the Federal Government paid N169.4 billion in subsidy for petrol in August 2023.

These developments raise questions about the sustainability of current petrol prices, and stakeholders call for greater transparency from the government regarding subsidy policies. The impact of rising subsidy costs on the nation’s economy is a growing concern, especially since the subsidy program had previously consumed trillions of Naira in government funds.

Before the official end of fuel subsidy in June 2023, the program had already cost the government billions of Naira. Reports indicate that subsidies had consumed N6.88 trillion up to October 2022.

Figures from the Nigerian National Petroleum Company Limited (NNPCL) showed that petrol subsidy reached N2.565 trillion between January and August 2022.

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While some experts argue that the government must address the realities of fuel pricing in the current economic climate, others believe that temporary measures, such as subsidies, may be necessary to prevent excessive price increases and social unrest.

The government has also expressed optimism that domestic refineries will start operating by December, potentially reducing reliance on fuel imports and subsidies.