There are strong indications that the Federal Government has quietly returned to the fuel subsidy regime, as it was gathered that N169.4 billion was paid as a subsidy for the month of August.
Naija News understands that the payment of N169.4 billion as subsidy in August was to keep the pump price at N620 per litre.
Considering the dynamics of the global oil market, one might guess right to say the federal government had to quietly return to the subsidy regime to save Nigerians from further hardships.
The international oil benchmark Brent crude futures crossed the $95 per barrel barrier. This, with the current rapid depreciation of the naira, only indicates that the landing cost of petrol has gone beyond the current pump price of N617 per litre.
In the last week of August, petrol was trading for $1,030.11 per metric tonne at the international market compared with the $859.25 it traded around July when NNPC increased the pump price to an average of N617 per litre. This shows an increase of 19.88 per cent.
Also, the exchange rate in July was N820/$ but now N920/$, indicating a 12.19 per cent increase. The crude oil price in July was $78.50 per barrel, it traded for $88.50 per barrel in the last week of August, but now the oil benchmark, Brent crude futures crossed the $95 mark.
Also, while the price per litre at the international market in July was $0.641, it stood at $0.792 in the last week of August. This means that the landing cost of fuel stands at about N728.64 per litre compared to the N529 it was in July.
The addition of freight costs, lightering costs (STS), distribution margin, and ancillary costs by the Nigerian Midstream Downstream Regulatory Authority (NMDPRA), Nigerian Port Authority (NPA) and Nigerian Maritime Administration and Safety Agency (NIMASA), as well as marketers’ margin, stands at about N90 to N105.
According to Daily Trust, N169.4 billion paid as subsidy for August was part of the dividends paid by the Nigerian Liquefied Natural Gas (NLNG) for the same month.
A document by the Federal Account Allocation Committee (FAAC), sighted by the platform on Wednesday, revealed that in August 2023, the Nigerian Liquefied Natural Gas (NLNG) paid $275 million as dividends to Nigeria via NNPC Limited. NNPC Limited reportedly used $220 million (N169.4 billion at N770/$) out of the $275 million to pay for the fuel subsidy. Then NNPC held back $55 million.
Hitherto, the Major Oil Marketers Association of Nigeria (MOMAN) had regularly provided a pricing update but suspended it.
A source at the association told Daily Trust that there is an instruction not to share the update because the government has said there would be no price increase.
However, further investigation by the platform revealed that the payment of N169.4 billion as subsidy for August had approval from above, a senior government official disclosed.
The government official further said a subtle deal had to be struck with oil marketers to keep the current price.
“If that payment was not approved, the country would have been thrown into serious crises because it was clear that the public could not bear further depreciation in pump price, so something had to give.
“Everything has been done to not offset the market balance until we are able to resolve the production with Dangote refinery as well as the loans, once this is settled, we should see some stability,’ the source added.
It would be recalled that last month President Bola Tinubu had ordered for the price of fuel to be stalled at N617 per litre, and the NNPCL had also confirmed there were no intentions of hiking prices further.