Nigeria is digging itself into deeper financial crisis every day that passes with a ballooning petrol subsidy that the country can ill afford.
The subsidy bill has now climbed to N1.8bn daily at an international oil price of $57 a barrel and at an official exchange rate of N380.
Senior executives in oil marketing companies say the pump price of petrol in Nigeria today should be between N183 and N185 a litre and not the current pump price of N160 in a country which this year is looking to borrow near N5 trillion to balance its federal budget alone.
Officials at the International monetary fund, IMF and the World Bank have consistently argued that removing the subsidy makes sense and that it will help the public finances of Africa’s largest economy but the government appears stuck on the slow lane.
With petrol pump price about N150-200 a litre cheaper in Nigeria than it is sold in neighbouring countries, consumption has now surged to a staggering 70 million litres daily, indicating a leakage across the borders of up to 30 million litres each day, the oil executives say.
The rise in the level of daily consumption in Nigeria is worrying and continues the trend seen last year during the lockdown when only demand for aviation fuel fell.
The government appears to be in no hurry to adjust the price of petrol and save the nation from a catastrophic financial collapse.
When labour leaders met with government officials a week ago, officials of NNPC, the national oil company which is carrying the burden of the subsidy, made it clear to all at the meeting that the nation cannot continue to carry the level of petrol subsidy it has imposed on itself and that something has to change.
BusisnessDay learnt that the labour leaders seemed to have gotten the message but they asked for two weeks to consult with their rank and file and then come back to government. The labour leaders themselves worry that selling the subsidy removal would alienate them from the workers and so are stalling while seeking to buy time.
The labour leaders also requested that the nation’s moribund petrol refineries should be rehabilitated but they were told that the plants were dead already.
It is understood that government asked labour to take three weeks, one more than they requested, indicating that even government itself either does not appreciate the gravity and urgency of the matter or is simply unwilling to make the difficult choices that must be made by Nigeria.
Government officials at PPPRA, the sector regulators and those at the petroleum equalization fund, PEF who should know better are keeping mum to protect the indefensible margins which the two government agencies take from the petrol pump price and for which no proper accounts are rendered.
The PPPRA takes N1.23 as administrative charge from the proceeds of every litre of petrol sold in Nigeria while the PEF takes an astonishing N7.51.
Last year, PPPRA said Nigeria spent N8.94 trillion on petrol subsidy in the 10 years to 2015.
A breakdown of the figure indicated that in 2006 a total of N257.36 billion was paid, in 2007, N271.51 billion while in 2008 N630.57 billion was paid as subsidy.
“Also, in 2009 N409.31 billion was paid out as by the government and N667.08 billion in 2010.
The agency further revealed that in the year 2011, federal government paid a total of N2,105.92 trillion an increase of N1,437.84 trillion from 2010 payment.
The PPPRA in its statement noted that in 2012, N1.35 trillion was paid as subsidy.
“A total of N 1, 316.63 trillion in 2013, N1,217.35 trillion in 2014 and N653.51 billion in 2015 was paid as subsidy claims, it added.
