Headline: NIGERIAN GOVERNMENT STILL PAYS SUBSIDY ON PETROL – PENGASSAN

 Nigerian government still pays subsidy on petrol – PENGASSAN

                National President of the petroleum and natural gas senior staff association of Nigeria (PENGASSAN), Festus Osifo

President Bola Tinubu had announced the end of payment of subsidy on petrol by the government in May.

The National President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Festus Osifo, on Friday, said the Nigerian government has restored subsidy on petrol, despite the official government policy of breaking with the subsidy regime since May.

Mr Osifo, who is also the president of the Trade Union Congress (TUC), one of Nigeria’s two largest worker’s union coalitions, disclosed this on Friday while featuring on a Channels Television programme, Politics Today.

“The government has to come clean. In reality today, there is subsidy because as of when the earlier price was determined, the price of crude in the international market was somewhere around less than $80 to a barrel. But today, it has moved to about $93/94 per barrel for Brent crude. So, because it has moved, then the price (of petrol) also needed to move,” Mr Osifo said.

The TUC, alongside its sister labour coalition, the Nigeria Labour Congress (NLC), has organised workers’ protests and declared nationwide strikes on different occasions to pressure the government to address the hardship caused millions of Nigerians by the removal of subsidy on fuel in May.

President Bola Tinubu had announced the removal of fuel subsidy in his inaugural speech on 29 May.

Following the announcement, the NNPCL directed its outlets nationwide to sell fuel between N480 and N570 per litre, an almost 200 per cent increase from the initial price below N200, leading to significant increase in transportation fares and prices of goods and services.

Again in July, petrol pump prices rose to N617 per litre at various outlets of the NNPCL in Abuja and other parts of the country.

At the time, the NNPCL attributed the rise in the petroleum pump prices in the country to ‘market forces’.

The NNPCL Group Chief Executive Officer, Mele Kyari, while speaking to journalists after a closed-door meeting with Vice President Kashim Shettima at the State House in Abuja, said with the deregulation of the oil sector, market realities will force the price of petrol up sometimes and at other times force it down.

In August, Mr Tinubu assured Nigerians that there would be no further increase in the pump price of petrol, despite the deregulation of the product.

The Special Adviser to the President on Media and Publicity, Ajuri Ngelale, disclosed this while briefing journalists in Abuja after a closed-door meeting with the president.

“The president wishes to assure Nigerians, following the announcements by the Nigerian National Petroleum Company Limited (NNPC) just yesterday, that there will be no increase in the pump price of petroleum motor spirit anywhere in the country,” the spokesperson said. “We repeat, the president affirms that there will be no increase in the pump price of petroleum motor spirit.”

Mr Tinubu also acknowledged that there are inefficiencies within the downstream sector that are contributing to the fuel price controversy. He assured that all loopholes associated with the smooth delivery of petroleum products in the country will be addressed immediately.

There have been speculations about the possibility that the government had partly reintroduced fuel subsidy, unannounced, to keep the pump price at N617, given the continued fall in the value of naira against the dollar since the petrol pump price was last increased in July. Since Nigeria depends mainly on imported refined products, apart price of crude oil, exchange rate is a key determiner pump prices petrol is sold to consumers.

Subsidy is back

Speaking on Friday, Mr Osifo said due to the cost of crude oil in the international market and the exchange rate, the government still pays subsidies on petrol.

“The speculation has been there looking at the fundamentals because two basic things that contribute to the pricing today are the exchange rate and the price of the crude in the international market.

“You know, in the last few weeks, the price of crude has been going up, and inches towards $95 per barrel. Based on this, there are speculations that there may be an increase in the price of Premium Motor Spirit (PMS) but behind the scenes, we have been engaging the government and trying to make them understand that there is no basis for that.

“Because for us, you know when they floated the exchange rate, you would recall that the exchange rate was moving at a very fast speed before some interventions came,” Mr Osifo said.

He also said: “Today the official exchange rate is around N770 per dollar. So what we have told them is that all international agencies, if you look at JP Morgan, Bank of America and all, they have said that our naira today is undervalued. What that means is that our naira should be exchanged somewhere around N600 to N630 to a dollar.

“And if the government is able to push it down to that range then we would be buying PMS at a little reduced rate compared to where it is today.

“So, we have told the government that there is no basis for us to be buying PMS at a price higher than what we have today. But instead, it should go down. But the controlling factor is the exchange rate and so if they could work on the exchange rate. Today it is somewhere around N770 to a dollar. But if the true value comes to bear around N600 to a dollar then we would even buy PMS at a cheaper rate,” he added.

Responding to the question of whether the government is still subsidising petrol since the removal of fuel subsidy, Mr Osifo said, “We have to be honest to Nigeria. As at today, I could tell you that if you look at the crude oil price, there is what they call Platt so if you google it you will see the Platt index and if you check the Platt index, that will give you the X depot price from Rotterdam.

“So, if you look at it and you convert it using our current exchange rate you know that the landing cost in Nigeria today ought to be more than what we are dispensing at the pump,” he said.

He said what that means is the additional cost is being catered for by the government.

“But our cry is this, we should manage our FX more effectively compared to the way we are managing it today. If the true value of our exchange FX is around N600 to a dollar, if that is the true value, the government should find a way to manage it there is no need for paying subsidy.

“The reason we are paying subsidy today is because our exchange rate has run away and if we continuously allow it to run, it will be a nightmare for everyone.”

He added: “They (the government) are paying subsidy today. You could see what happened in the last few months when the subsidy was removed. You could see the challenges that an average Nigerian has passed through. So, it has been very difficult but the government had the tools with which they could use in managing the exchange rate more effectively so that the subsidy will disappear but they are not using it.”

How government can stop subsidy

For the government to stop subsidising petroleum products, Mr Osifo explained, two things must happen.

“The only reason the price will not move is when you are able to manage your exchange rate effectively and you are able to pump in supply and bring down the exchange rate.

“So, if the exchange rate comes down today, we will not be paying a subsidy. But with the exchange rate value and the price of crude oil in the international market, we have introduced a subsidy,” he said.

Mr Osifo said, “I also see that probably the federal government has also woken up. They have also seen that allowing the subsidy to go fully the way it was and with the price of crude going up Nigerians are going to pay more. So the suffering will increase compared to where it was before.

“If today, you increase (petrol prices) again, you are doubling the pains of Nigeria. If everything has gone up in Nigeria by over 200 to 300 per cent. So if you increase it again what you are doing is that you are moving it from about 300 per cent probably to 400 or 500 per cent.

“The government should just come clean and open up to Nigerians,” he said.

The Nigerian National Petroleum Company Limited (NNPCL) had on Friday said it has no intention to increase the pump price of petroleum.

The NNPCL made this known in reaction to speculations in the public domain about the company’s plan to raise petrol pump price from the current N617 per litre to above N700.

“Dear esteemed customers, we at NNPC Retail value your patronage, and we do not have the intention to increase our PMS pump prices as widely speculated.

“Please buy the best quality products at the most affordable prices at our NNPC Retail Stations nationwide,” the NNPCL said.

NNPCL imports almost all the petrol sold in Nigeria and using what it calls ‘under-recovery’ pays itself the subsidy for costs incurred in the importation and distribution of the product that is not paid by consumers.