Govt Saved N400 Billion After Removing Subsidy On Fuel, Say Oil Marketers

Oil marketers disclosed on Thursday that the federal government has saved around N400 billion after removing the subsidy on fuel. The fuel subsidy removal announcement was made on May 29.

The oil dealers also noted that Nigerians might face much higher prices in July due to subsidy removal as the United States dollar price is increasing against the local currency, the naira. Following the subsidy removal announcement, the fuel prices already increased from N195 per litre to N600 per litre.

National President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Chinedu Okonkwo explained that the government is "making money" at this moment.

"At least with this removal of subsidy, the government has racked in hundreds of billions, whether in naira or dollar," Okonkwo explained, Punch reported. "This is because every month we know how much they lose before."

Okonkwo recalled oil marketers were informed in February about how much NNPCL was spending on fuel subsidy on a monthly basis.

Managing Director of the Nigerian National Petroleum Corporation, Mele Kyari said at that time, "Today, by law and the provisions of the Appropriation Act, there is a subsidy on the supply of petroleum products, particularly PMS imports into our country. In current data terms, three days ago, the landing cost was around N315/litre."

Kyari added, "Our customers are here; we are transferring to each of them at N113/litre. That means there is a difference of close to N202 for every litre of PMS we import into this country. In computation, N202 multiplied by 66.5 million litres, multiplied by 30 will give you over N400bn of subsidy every month."

Okonkwo disclosed that oil marketers are holding meeting about independent marketers importing petrol. He also explained that the petrol price was rising due to forex rates, noting that the removal of fuel subsidy wouldn't help in the long run.

"When there is deregulation and no subsidy, the price of petrol would either go up or come down. If you want to profiteer, those who bring in and sell at cheaper rates would put you out of business," he said. "So, the market fundamentals will determine the pricing and capping. Therefore, the floating of the naira at this time that Nigeria is beginning to make savings is not going to be a fixed thing."

Depending on how the country will manage its crude oil, the exchange rate will keep moving up and down, the IPMAN president noted, adding that "by the time we begin to meet our OPEC quota and other areas of generating foreign exchange, the naira will begin to firm up."

The president believes that once the naira rate becomes strong, fuel will automatically become cheaper. Hence, Nigerians should not think that fuel prices will continue to rise.