Subsidy: FG may spend N236bn monthly on imported, Dangote petrol

The Federal Government may spend about N236 billion monthly to subsidise the Premium Motor Spirit, popularly called petrol, that is imported through the Nigerian National Petroleum Company and the one that is solely off-taken by NNPC from the Dangote Petroleum Refinery.

On Monday, the President and Chief Executive of Dangote Group, Alhaji Aliko Dangote, called on the Federal Government to end fuel subsidies completely.

He said the removal would help determine the actual petrol consumption in the country, as his position received backing from the Independent Petroleum Marketers Association of Nigeria and the Centre for Promotion of Public Enterprise on Tuesday.

This came as it was gathered that members of the Major Energies Marketers Association of Nigeria had lifted over 50 million litres of PMS from the Dangote refinery in the past week.

Based on the revelations by major oil marketers on the cost of Dangote petrol sold to them by NNPC, the price at which NNPC got the product from Dangote, it was established that the product was being subsidised by the government through the national oil firm.

Major oil marketers stated that the product was sold to them by NNPC at N766/litre, whereas NNPC had earlier said that it got the commodity at N898/litre from the Dangote refinery.

This implies that the company subsidised the commodity by N132/litre to the marketers.

Dangote commenced the release of PMS into the domestic market on September 15, 2024, and stated that it would be pumping out 25 million litres of petrol to the Nigerian market daily.

This means that the NNPC is shouldering a subsidy of about N3.3bn daily, while in 30 days it may spend N99bn to subsidise Dangote petrol to marketers.

For imported petrol, though there are various figures on the actual volume of PMS consumed in Nigeria, the most recent figure released by the Nigerian Midstream and Downstream Petroleum Regulatory Authority put the figure at about 45.7 million litres daily.

This means that should the Dangote refinery provide 25 million litres daily, the volume of imported petrol required to meet the domestic demand would be about 20.7 million litres.

In July this year, the Major Energies Marketers Association of Nigeria revealed that the landing cost of imported PMS was N1,117/litre. The landing cost is simply the price at which the commodity lands on Nigeria’s shores.

Dealers in the sector stated on Tuesday that the landing cost of the commodity was still around the figure reported in July.

Independent marketers revealed that NNPC now sells petrol to IPMAN members at N895/litre.

The IPMAN National Publicity Secretary, Chief Chinedu Ukadike, said, “NNPC has started supplying us using the new price template of N895/litre,” he stated while expressing the need for an open market of a willing buyer and willing seller.

Before the release of PMS to the Domestic market by Dangote, NNPC was the sole importer of petrol into Nigeria, as other marketers stopped importing the product due to concerns around accessing foreign exchange.

However, some major marketers have commenced the importation of the commodity.

With the landing cost of imported petrol at N1,117/litre and a price of N895/litre sold to independent marketers by NNPC, it means the company is subsiding the product by N222/litre.

For 20.7 million litres, the national oil firm would pay N4.59bn daily and N137.86bn in 30 days.

A summation of the estimated N99bn subsidy on Dangote petrol and the N137.86bn subsidy on imported petrol means that the government through NNPC may spend about N236.86bn monthly as subsidy on PMS.

But Aliko Dangote in his interview in New York on Monday called for the complete halt of subsidy.