Nigeria spent a total of N905.27 billion on petrol subsidy in eight months amid rising global oil prices, imparting the amount of oil revenue available for sharing among the three tiers of government.
With the international oil benchmark, Brent crude, nearing $80 per barrel on Monday, the landing cost of imported petrol and subsidy are expected to increase.
The subsidy, which the The Nigerian National Petroleum Corporation (NNPC) refers to as ‘value shortfall’ or ‘under-recovery’, continue to increase with the recovery in global oil price after the initial drop in the wake of pandemic.
The pump price of petrol currently goes for N162-N165 per litre across the country in spite of the rising global oil prices.
The NNPC, which has been the sole importer of petrol into the country in recent years, has been bearing the subsidy cost since the start of this year.
Data from the corporation showed that it incurred N25.37 billion subsidy cost in January, N60.40 billion in February, N111.97 billion in March, and N126.30 billion in April and N114.34 billion in May.
The subsidy cost rose from N143.29 billion in June to N175.32 billion in July but fell to N149.28 billion in August.
“The August 2021 value shortfall of N149,283,084,869.20 is to be deducted from the September 2021 proceeds due for sharing at the October, 2021 FAAC meeting,” the corporation said in a document, according to a Punch report.
While marketers have continued to stress the need to allow market forces to determine the pump price of petrol and do away with subsidy, it remains uncertain whether the discussions between the Federal Government and labour unions will lead to the deregulation of petrol prices.
Analysts at CSL Stockbrokers Limited noted that with no provision for petrol subsidy in the 2021 budget, the NNPC had resorted to direct deduction from FAAC remittance.
“These deductions affect the revenues accruable to the federation,” they said in a note on Friday.
“A steep naira devaluation and an increase in global crude prices, which implies an increase in the landing cost of petrol on many occasions, have caused the continuation of the subsidy regime.
“The deregulation of the downstream oil sector remains a politically sensitive discourse. Deregulating the downstream sector, which would in most times involve raising the pump price of petrol with increasing oil price, is always a challenge in a country where the subsidy on petrol prices is seen as the only source of social security.
“We have always expressed concerns that the current timing by the government to get rid of the longstanding subsidies is inopportune.
“In effect, the government may be forced to retain the subsidy, given the impact of the pandemic, high food prices and hike in electricity tariffs on the already squeezed Nigerian consumers,” the analysts said.