Fuel Subsidy: Tinubu Holds Meeting with Oil Marketers, Issues Directives to NEC on Interventions

President Bola Tinubu has issued a directive to the National Economic Council (NEC), under the leadership of Vice President Kashim Shettima, to initiate measures aimed at alleviating the impact of the removal of petrol subsidy on the Nigerian people.

The disclosure was made by Governor Dapo Abiodun of Ogun State during a courtesy visit to Tinubu at the Presidential Villa in Abuja, where he led a delegation of major oil marketers. Governor Abiodun expressed solidarity with the President for his courageous decision to end subsidy payments, stating that it demonstrated Tinubu’s determination to address the long-standing issue that had plagued the country.

According to the governor, although there might be some initial discomfort for the people, the removal of subsidy would eventually yield positive results. He emphasized that Nigeria was spending approximately N4 trillion annually on subsidies, which would now be allocated to the Federation Account Allocation Committee (FAAC) for distribution among the three tiers of government.

During the meeting, Mrs. Winifred Akpani, Chairman of the Depot and Petroleum Marketers Association of Nigeria (DAPPMAN), addressed journalists and expressed the support of major oil marketers for the Federal Government. She acknowledged the difficulties caused by the removal of subsidies but remained optimistic that it would reposition the country. Akpani revealed that Nigeria had already spent over N2 trillion in the first three months of 2023, and projected a potential expenditure of about N7 trillion by year-end if the subsidies were not removed.

Akpani also highlighted that Nigeria had been subsidizing fuel for neighboring countries through the subsidy program, a practice that was no longer sustainable while the Nigerian economy suffered. As a way to mitigate the effects of the subsidy removal, the marketers announced their intention to donate 100 mass transit buses worth N10 billion, and they encouraged other corporate entities to follow suit.

In addition, Governor AbdulRahman AbdulRazaq of Kwara State, who led the Nigerian Governors’ Forum (NGF) delegation, commended President Tinubu’s decision to remove the subsidy. The governors expressed their congratulations to the President and pledged their collaboration to alleviate the short-term impact of the subsidy removal.

Meanwhile, oil marketers reported a significant increase in the ex-depot price of petrol following the subsidy removal. Mike Osatuyi, the national operations controller of the Independent Petroleum Marketers Association of Nigeria (IPMAN), stated that the ex-depot price had risen to N479.50 per liter. He further explained that the cost of a truckload of petrol had surged from N7.7 million to N21.8 million, making it challenging for marketers to cover the expenses.

Osatuyi noted that the pricing of petrol would fluctuate in response to market realities, particularly the price of crude oil, which was currently around $76 per barrel. The national president of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Billy Gillis-Harry, echoed similar concerns, emphasizing that the increase in the ex-depot price would come at a significant cost for members of the association.

The removal of subsidies has already resulted in a decrease in daily fuel sales at petrol stations across Lagos. Some stations reported a sales drop of up to 25%, with three stations experiencing a decline of over 32% in daily sales over the past week. Before the subsidy removal, the government had claimed that Nigerians consumed approximately 62 million litres of petrol daily, although these figures were often disputed as inflated.

Atedo Peterside, the founder of ANAP Foundation, predicted that the consumption figures provided by the Nigerian National Petroleum Corporation (NNPC) would significantly decrease, as they were comprised of real domestic consumption, smuggled petrol, and nonexistent petrol allocated to fraudulent subsidy claims.

Mele Kyari,

the Group Managing Director of NNPC, anticipated a potential 30% decline in petrol consumption following the price adjustment. Although it is still too early to determine the full extent of the sales drop, oil marketers acknowledged that sales had generally been decreasing since the removal of subsidies.

In related news, the organized labour movement’s hopes of diverting the $800 million loan facility obtained from the World Bank’s International Development Association (IDA) for the benefit of 50 million poor Nigerians have been dashed. The World Bank, in compliance with the agreement reached with the Nigerian government, insisted that the loan cannot be used for another intervention to cushion the effects of petrol subsidy removal.

The terms of the loan restrict its allocation to other areas of intervention. For instance, out of the $800 million loan, the Federal Ministry of Finance, Budget, and National Planning is expected to spend $23.3 million on consultancy fees, staffing, logistics, training, and workshops to mitigate the impact of petrol subsidy removal on the 50 million poor Nigerians.

The agreement between the Nigerian government and the IDA, signed by the former Minister of Finance, Budget, and National Planning, Zainab Ahmed, outlines the establishment of a National Social Safety Nets Coordinating Office (NASSCO) within the Federal Ministry of Humanitarian Affairs. The NLC and TUC attempted to persuade the Federal Government to redirect the loan towards funding the use of Compressed Natural Gas (CNG) as an alternative fuel option for vehicles and commercial operators.

NLC President Joe Ajaero opposed the distribution of N5,000 to 50 million people as a means to mitigate the effects of subsidy removal, considering it an insult to Nigerians. He raised concerns about identifying the beneficiaries and highlighted that the intervention should benefit the majority of the people, given the multidimensional poverty in the country.

Another issue discussed during the meeting was the revival of the N250 billion CNG project by the Central Bank of Nigeria (CBN). However, controversies surrounding the management of the fund had halted its implementation.

The Federal Government had emphasized that the intervention facility would stimulate finance and encourage investment in the gas value chain for sustainable business development in Nigeria.