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Why Nigeria Is Still Subsidising Petroleum – NNPC Chief



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The Managing Director of the Nigerian National Petroleum Corporation, Mele Kyari, on Tuesday suggested that the inability to find an appropriate price for petrol has forced the continuation of the subsidy scheme.

The NNPC is currently the sole, official importer of petroleum products into the country.

While its landing price is about N256 per litre, according to Mr Kyari, petrol sells for N162 to N165 in most parts of Lagos.

In March 2020, the Federal Government said it would allow market forces to dictate the pump price of petrol.

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But after oil prices rose in the preceding months, the Federal Government decided not to adjust the price correspondingly under pressure from organised labour.

“The reality is that we cannot afford it,” Mr Kyari said on Tuesday while appearing on Channels Television’s Sunrise Daily.

“But also the second reality is if you don’t do something smart, you could end up throwing prices at Nigerians that are well above prices that they should pay for.”

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The NNPC chief said the government is still engaging with organised labour and other stakeholders on how to properly price the product.

“The engagement is aimed at making sure there is a reasonable level of pricing that we can do that will recover the cost,” he said.

Fuel smuggling

Meanwhile, a huge chunk of the petroleum the NNPC pays for is being smuggled to neighbouring countries where they are sold at higher prices.

“Petroleum consumption in Nigeria is not up to 60 million litres per day, but we supply up to that,” Mr Kyari said.

“We always plan with 60 million litres, because anytime we do below that, there is a crisis.”

He acknowledged that there “are sharp practices which we are trying to control” and “an organised cross-border smuggling of petroleum, which is associated with the price of petroleum itself.”

The smuggling, he noted, is exacerbated by the fact that Nigeria shares borders with countries who have no choice but to transport petroleum by road.

When borders were shut last year, the NNPC chief said, consumption fell to 52 to 53 million litres per day. And during the thick of the COVID-19 lockdown in 2020, the number fell to about 42 million litres.

“If everything works well and consumption is limited to our country, we are dealing with about 42 million litres,” Mr Kyari said.

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