Nigerians may need to adjust their expectations ahead of possible removal of subsidy as the rising price of crude oil may push Premium Motor Spirit (PMS), otherwise called petrol, to N403 per litre.
As at January 14, 2022, PMS pricing template was N403 per litre, making a subsidy differential of N241 on every litre sold in the country.
According to the estimate, petrol per litre is N349 from country of import but freight and landing cost push the figure to N384, while distribution margin and bridging fund in transport logistics further push the cost to N403.
The Nigeria Governors’ Forum (NGF) had in the early hours of yesterday, rose from a five-hour meeting with a resolution to initiate talks with the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) on the proposed removal of subsidy on petrol.
As NLC, on Wednesday, mandated all states organs to intensify mobilisation for next Thursday’s nationwide protest against the Nigerian government over its proposed increase in the pump price of petrol, the National Economic Council (NEC) rose from its first meeting this year, in Abuja, disclosing that a decision on the removal of petrol subsidy will be made in June when the provision for its payment in the 2022 budget expires.
While crude oil price is currently selling for about $89 per barrel pushing landing cost and retail price to record high, the 36 governors are expected to convince labour and other Nigerians on the need to finally remove petrol subsidy in the next five months after the 2012 move failed.
Recall that in February last year when crude oil price hovered at $67 per barrel, the governors canvassed that the pump price of petrol should be allowed to sell at prevailing market price of N350 per litre to enable government save money.
Speaking ahead of the engagement, some stakeholders, yesterday, insisted that liberalisation of the downstream sector, including removal of subsidy, were necessary steps if the country must end its borrowing and revive the downstream segment of the nation’s petroleum industry.
Coming at a time when implementation of the N30,000 minimum wage remains a challenge across many states, stakeholders insisted that there was need for the government to gain the trust of citizens in removing subsidy, adding that most Nigerians no longer believe in their government.
Following the economic challenges that resulted from the COVID-19 pandemic, the Federal Government had opted for deregulation of the downstream, partially removing subsidy from petrol, a development, which almost doubled the price, insisting citizens now have to accept international market forces, especially crude oil price and exchange rate.
The pump price of petrol was initially downward with the near zero crash of oil price at the peak of the pandemic. Afterwards, the pump price rose from N121.50 to N123.50 per litre in June, 2020; N140.80 to N143.80 in July and N148 to N150 in August of same year. In September, pump prices rose further to N158 and N162 per litre.
An attempt to increase the pump price in December 2021 met deadlock, as labour unions tackled government to a standstill. The NLC and TUC were furious over repeated hikes in petrol price, and forced the Federal Government to a dialogue, where the Nigerian National Petroleum Corporation (NNPC) agreed to slash N5 from N167.44, a development which the Minister of Labour and Employment, Dr. Chris Ngige, said would bring down the price of petrol to N162.44.
Contrary to expectations that the signing of the Petroleum Industry Act (PIA) would automatically commence the deregulation of the downstream sector, especially the removal of subsidy, the Federal Government said last year that the retail price petrol would remain at N162 per litre until a feasible framework is developed.
The government, however, disclosed toward the end of last year that N5,000 would be paid to poor Nigerians as grant for the removal of petrol subsidy, adding that the removal has become sacrosanct.
Energy expert, Adeola Adenikinju, said that governors must do much more than convincing labour by proving to Nigerians why it is critical to remove subsidy and the plans to assuage its impacts on Nigerians.
According to Adenikinju, since the government has already lost trust of the people, there is need to implement the subsidy removal with phased plans that the government will commit to, to ensure trust is regained.
