Dangote Refinery’s recent announcement of a ₦65 reduction in the ex-depot price of petrol, from ₦890 to ₦825 per litre, effective February 27, marks the second price decrease this year and the third within two months. Similarly, the Nigerian National Petroleum Company Limited (NNPCL) has reduced the pump price of Premium Motor Spirit (PMS), commonly known as petrol, to ₦860 per litre.
This development is the latest in a price war among oil marketers and independent petroleum dealers, influenced by fluctuations in global crude oil prices. In a public notice on the price reduction, NNPCL listed three partner off-takers in Lagos:
- MRS: ₦860 per litre
- AP: ₦865 per litre
- Heyden: ₦865 per litre
Whether competition will be the game changer remains to be seen. Only time will tell.
The Fuel Subsidy Debate
The fuel subsidy has been a contentious policy issue in Nigeria for the past 20 years. Analysts have debated the sustainability of the subsidy program, with some labeling it wasteful and unsustainable, while others argue that Nigeria is not yet ready for its removal.
President Goodluck Jonathan attempted to end the subsidy regime in 2012, but widespread protests forced him to reverse the policy. The fuel subsidy placed a significant burden on Nigeria’s finances. In 2023, President Muhammadu Buhari’s administration estimated that maintaining the subsidy would cost ₦6.72 trillion for the year.
The Nigerian Economic Summit Group (NESG) warned that continued subsidy payments were creating a fiscal crisis, consuming over ₦3 trillion annually and limiting the government’s ability to invest in education, infrastructure, security, and other critical sectors.
The Tinubu Era and Fuel Price Shocks
President Bola Tinubu announced the removal of the fuel subsidy in his May 29, 2023 inaugural speech. This policy led to an immediate hike in fuel prices, with petrol rising from ₦238 per litre to over ₦600, and later exceeding ₦1,000 per litre. The president advised that the hardship was a necessary short-term sacrifice for a better future.
However, with recent reductions in petrol prices, it seems the benefits of the policy are beginning to emerge. Is this a sign that the fuel subsidy removal is working? Only time will tell.
Ubong Usoro for Nigeria Magazine
