The Nigerian downstream petroleum industry is on edge as indications emerge that the Federal Government may struggle to sustain the current subsidy on petrol due to escalating import bills. Industry insiders revealed that a significant hike in pump prices is likely, with a compromise price of N1,000 per liter or more being speculated, though the actual landing cost could be as high as N1,205 per liter, excluding delivery costs.
The Nigerian National Petroleum Company Limited (NNPCL) is reportedly facing difficulties in maintaining adequate fuel supply, leading to severe product scarcity nationwide. The situation has worsened as some international suppliers are now unwilling to continue delivering on credit, and a growing portion of fuel is being smuggled out of the country.
According to recent analyses, the total cost, including all associated expenses, would raise the official pump price to around N1,405 per liter, if subsidies are fully eliminated. This has put the government in a dilemma: either to allow full cost recovery by ending the subsidy or to share the burden with consumers at a compromised price.
NNPCL has already signaled that it cannot sustain fuel importation at these rising costs. The company, which had been authorized by President Bola Tinubu to use the 2023 dividends for subsidy payments, now faces a subsidy bill estimated to reach N6.884 trillion by December 2024. This has made it impossible for NNPCL to remit taxes and royalties to the federation account.
Petroleum marketers expect the government to announce a new fuel price this month, with some industry players indicating readiness to import fuel if given the necessary support. However, challenges such as foreign exchange instability and high costs of funds continue to hinder independent importation efforts.
As the fuel scarcity intensifies, motorists are expressing frustration over the long queues at filling stations and the high black market prices, which have surged to N940 per liter in some areas. Meanwhile, the Dangote Group has announced that it has commenced petrol refining at its new refinery, offering a glimmer of hope for easing the nation’s reliance on imported fuel.
Experts have called for greater cooperation between the government and local refineries to process crude oil domestically, as well as a forensic audit of NNPC’s financial records to assess the true cost of importing fuel into the country.
