The minister of State for Petroleum and the GMD NNPC spoke passionately about the removal of subsidy because that was the proper thing to do. But recall that was in April 2020. But recall that as of April 2020, petrol sold for 145 Naira per liter.
In March 2020, crude oil sold for 32 dollars per barrel. In April 2020, crude suddenly suffered a sharp drop and fell to 18 dollars a barrel. So the imported cost of petrol suddenly fell way below 145 Naira per liter. So subsidy disappeared on its own, due to the forces of economics rather than a deliberate government policy. As a matter of fact, the government even reduced the price of fuel from 145 Naira per liter to 125 Naira per liter because even at 125 Naira per liter there was no subsidy.
It was a perfect opportunity for the government to ensure that subsidy does not return by ensuring that the price of petrol going forward gets adjusted to reflect the international price of crude oil which is the major determinant. This was at the peak of Covid and its attendant worldwide lockdown.
But gradually the price of Crude started inching up. And gradually the price of petroleum products inched up as well So the government increased the price of petrol from 125 to 142 and now to 165 Naira per liter today. But crude kept going up until the landed cost of petrol breached the 165 level and we came back to the subsidy So now Government has to make a judgment call.
Recall in April 2020, the simple forces of economics worked in their Favour. In 2021, it has to be a deliberate economic and political decision. And this is where we got stuck.
When NNPC says they shall not increase the ex-depot price of petrol in May, what I understand is that the pump price won’t change in May. It’s their own way of ensuring stability in supplies and distribution. But the ex-depot price of petrol is 148 Naira per liter. NNPC sells to marketers at 128 Naira per liter so marketers can sell ex-depot at 148 Naira per liter and then petrol stations can sell at not more than 165 Naira per liter 216 Naira per liter is the landed or imported cost of petrol and not ex-depot.
In fact, it is the difference between the 218 and the 128 NNPC sells that is the subsidy! We must accept the fact that subsidy from the point of view of the government is both an economic and a political decision It does not make economic sense to spend 4b Naira every day subsidizing on a product called petrol. You can’t spend 120 b Naira a month subsidizing petrol when you are borrowing money to pay salaries! But this is strictly an economic argument.
Government also has a responsibility to ensure their is political stability in the country. As a matter of fact the security and political stability takes precedence over economics as far as the duties of government is concerned So government shall struggle to remove subsidy and increase the price of petrol if they are not convinced the populace can afford and most importantly accept it So that’s where we are . We hope that the government shall find a solution sooner rather than later as we continue to bleed and fritter away our meager resources in the name of petrol subsidy