Oil market officials said on Thursday that the federal government will no longer subsidize premium motor spirits (commonly known as gasoline) after May 31, 2023, when the initiative officially went into effect. By abolishing , it has saved about 400 billion Naira so far.
Moreover, oil traders said the recent swings in the naira against the US dollar by the federal government are likely to push gasoline prices higher in July. The Central Bank of Nigeria will harmonize the country’s exchange rate at the window for investors and exporters on June 14, 2023, allowing market forces to determine the exchange rate.
Downstream oil producers said on Tuesday that Nigeria has lost thousands of dollars since the subsidy scheme was suspended in May after the Nigerian National Oil Company announced a limit on how much it had previously spent on subsidies each month. announced that it had saved millions of dollars.
“Now they (the government) are making money. At least the government has raised hundreds of billions of dollars, whether in naira or dollars, by removing subsidies. That’s because we know in advance how much they’re losing each month,” said Chinedu Okonkwo, national president of the Nigerian Independent Oil Dealers Association.
Okonkwo quoted comments made by the group’s chief executive, Mele Kyari, at a meeting with oil sector executives in February, saying market participants were skeptical about how much NNPCL would contribute to monthly subsidies. He said he was informed of the spending.
“Today, the supply of petroleum products, especially PMS imports, to our country is subsidized in accordance with the provisions of the law and the Appropriations Code,” Chiari said at the meeting. The wind speed at landing three days ago was about 315 N/l. “Our customers are here, switching at 113 N/liter each, which means that for every liter of PMS imported into this country, there is a difference of almost N202. N2O2 x 66.5 million liters x 30 will provide more than N400 billion in subsidies per month.”
Commenting on independent distributor gasoline imports, Okonkwo suggested that oil traders are holding meetings on the issue.
“We are holding meetings with many people who want to start importing PMS. We are not resting on our laurels so far,” said IPMAN chairman. Okonkwo conceded that gasoline prices would rise according to the exchange rate, but argued that the removal of subsidies would not only result in steady increases in PMS costs.
“With deregulation and no subsidies, gas prices will go up or down. If you want to make a profit, dealers who bring in and sell you cheaper will put you out of business.
“So market fundamentals will drive pricing and caps. So at this point in time when Nigeria starts saving, Naira fluctuations are not constant,” he explained. The IPMAN chairman further strengthened the naira, saying, “The exchange rate will fluctuate depending on how we manage crude oil, which is a means of earning foreign currency.”
“And that leads to cheaper fuel. So we shouldn’t assume that fuel costs will continue to rise. Naira fluctuations are a good thing because at previous levels, depending on who you know, only at the official rate. Because you don’t have access to dollars.”
