Nigerian Government Saves N400bn in Four Weeks Following Removal of Fuel Subsidy

Possibility of Petrol Price Increase in July Raises Concerns Amidst Currency Floatation

In a significant development, the Nigerian federal government has reported saving approximately N400 billion within four weeks since the official removal of subsidy on Premium Motor Spirit (PMS), commonly known as petrol, on May 31, 2023. Oil marketers revealed this encouraging news on Thursday, highlighting the positive financial impact of the subsidy removal initiative.

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The recent floating of the naira against the United States dollar by the Federal Government has raised concerns among industry operators, suggesting a potential rise in petrol prices in July. The Central Bank of Nigeria unified the country’s exchange rates into the Investors and Exporters window on June 14, 2023, enabling market forces to determine the exchange rate.

Industry leaders in the downstream oil sector emphasized that Nigeria has already saved hundreds of billions since ending the subsidy regime in May, as revealed by the Nigerian National Petroleum Company Limited (NNPCL) regarding its previous monthly expenditure on subsidies. Chinedu Okonkwo, the National President of the Independent Petroleum Marketers Association of Nigeria, confirmed that oil marketers were made aware of the NNPCL’s monthly subsidy spending during a meeting with oil sector operators in February.

With the removal of subsidy, the Nigerian government has now accumulated significant revenue, amounting to hundreds of billions in either naira or dollars. Okonkwo further explained that the removal of subsidy would impact the pricing of petrol based on market fundamentals and competition. While acknowledging the potential rise in petrol prices due to forex rates, he highlighted that market dynamics would determine the pricing and capping, preventing undue profiteering.

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In response to the fluctuating exchange rates, Billy Gillis-Harry, the President of the Petroleum Products Retail Outlets Owners Association of Nigeria, expressed expectations that the exchange rate would eventually decrease under the leadership of President Bola Tinubu’s administration. Gillis-Harry also mentioned that his association, PETROAN, is actively pursuing an import license for petrol and engaging in negotiations with the government to revitalize the country’s refineries.

Meanwhile, organized labor groups have called for patience from Nigerians, assuring them that negotiations with the federal government are underway to address the challenges posed by the removal of fuel subsidy. The spike in the cost of living conditions since the subsidy removal has prompted concerns among citizens, with oil marketers projecting a potential increase of N700 per liter in fuel prices by July 2023.

Tommy Etim, the National Vice-President of the Trade Union Congress and a representative of the organized labor interfacing with the government, urged Nigerians to view the current situation as a collective sacrifice. He emphasized that ongoing negotiations aimed to secure favorable palliatives for the citizens, ensuring their interests are protected.

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As Nigeria continues to navigate the aftermath of the fuel subsidy removal, the government’s substantial savings and ongoing discussions with labor groups hold the promise of a more stable and sustainable energy market. While concerns remain regarding potential price hikes, the nation is optimistic about addressing the challenges and achieving long-term benefits for its citizens.

Source: The Punch

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