The Federal Government is projected to spend approximately ₦1.68tn on Premium Motor Spirit (PMS) subsidy from September to December this year, as per analysis from oil marketers and industry experts.
Dealers in the downstream oil sector assert that due to the falling value of the naira against the US dollar and rising global crude oil prices, the pump price of petrol should ideally be between ₦890 to ₦900 per litre.
Despite no official admission from the government, reports suggest that fuel subsidy may have been quietly reintroduced.
The weakening naira, coupled with surging crude oil prices, has increased the cost of PMS significantly.
Brent crude, the global oil benchmark, reached around $95 per barrel, impacting fuel prices.
The naira’s exchange rate on the parallel market plummeted to ₦980 per dollar, while it slightly appreciated on the FMDQ Investor & Exporter forex window, closing at ₦770.71 per dollar.
Oil marketers argue that the prevailing forex crisis and rising crude prices make it impossible to maintain the current petrol price of ₦617 per litre without subsidies.
In August 2023, reports indicated that the Federal Government paid ₦169.4bn in fuel subsidy.
Industry experts suggest that if the naira’s decline continues and crude prices remain high, the subsidy cost could soar to ₦1.68tn for September to December 2023.
The situation emphasizes the complex challenges surrounding fuel pricing in Nigeria and its impact on the economy.
