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The Federal Government on Thursday revealed that about N120 billion ($263,248 million) was spent by the current administration for Premium Motor Spirit (PMS/ Petrol) subsidy monthly.
The Minister of State for Petroleum Resources, Timipre Sylva, made the disclosure at the fifth edition of the Special Ministerial Briefings coordinated by the Presidential Communication Team.
He said the Nigerian National Petroleum Corporation (NNPC) absorbs the cost differential which is recorded in its financial books.
The Group General Manager (GMD) of the NNPC, Mele Kyari, explained that while the actual cost of importation and handling charges amounts to N234 per liter, the government is selling at N162 per liter.
He, however, said the NNPC can no longer afford to bear the petrol subsidy cost, adding that sooner or later Nigerians would have to pay the actual cost for the commodity.
Kyari, who avoided calling the payment a subsidy, said the NNPC pays between N100-120 billion a month to keep the pump price at the current levels, insisting that market forces must be allowed to determine the pump price of petrol in the country.
The NNPC boss said: “Today, NNPC is the sole importer of PMS, we are importing at market price and we are selling at N162 per litre to day. Looking at the current market situation today, the actual price could have been anywhere between N211 to around N234 to the litre. The meaning of this is that consumers are not paying for the full value of the PMS that we are consuming and therefore, someone is bearing that cost. As we speak, the difference is being carried on the books of the NNPC and I can confirm to you that the NNPC may no longer be in the position to carry that burden and because we can longer afford to carry it on our books.
“As we speak today, I will not say we are in subsidy regime but we are in a situation where we are trying to exit this under-priced sale of PMS until we come to terms of the full value of the product in the market.
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“PMS sells across our borders anywhere around N300 to the litre and in some places up to N500 to N550 to the litre.
Kyari added that upon full deregulation, oil markets would begin to import PMS thereby taking the burden off NNPC and bringing direct sale-direct purchase (DSDP) Programme to an end.
“We know there’s one major challenge why oil marketing companies have not started importing which is around access to foreign exchange and we are working on this with the Central Bank of Nigeria and as soon as that is available, oil marketing companies will also resume import of petroleum products.”
On the two agreements between Nigeria and Niger Republic for the importation of petrol from the neighbouring country to Nigeria, Sylva explained that it was a way to boost trade between the two countries.
Nigeria and Niger had in July 2018, agreed to build a pipeline to bring crude oil from Niger to the proposed Katsina Refinery. The agreement was followed in 2020 by another one signed between the two countries on petroleum products transportation and storage.
Sylva said Nigeria wants to legalise the thriving illegal petroleum products sale already going on between the countries, adding that it also needs to share its experience in the oil exploration sector with neighboring countries.
“You know that Niger is a smaller country and Nigeria is more experienced in oil exploration than most countries in Africa. You find out that most of these countries have these constraints. Although, we have this agreement with Niger, they have constraint on how to deliver on it to this country because of the contract they have with the Chinese. So, if we realise that they have constraints we can change. The whole idea is that Niger has 20,000 bpd which is even bigger than their consumption. …
“We want to begin to create business with out neighbors. This is what ECOWAS and AU are trying to encourage. That is inter-regional trade and begin to trade among ourselves.”
