In the current climate, the average Nigerian can be compared to an upturned soda bottle—ready to explode at the slightest provocation. There’s a palpable mix of anger and despair spreading across the nation. Transportation costs are soaring, and the prices of everyday items are skyrocketing.
For the typical market trader, the Point of Sale (POS) operator under an umbrella, or the barber working by the roadside, the intricate factors that influence fuel distribution and pricing are mysteries. All they know is that “everything is expensive,” with Premium Motor Spirit (PMS), commonly known as petrol, topping the list.
The Fuel Subsidy Conundrum
The root cause of this turmoil lies in a long-standing and complex issue: fuel subsidy. Introduced in the 1970s and formalized in 1977 with the Price Control Act, fuel subsidies were intended to reduce the cost of fuel for consumers. However, on May 29, 2023, during President Bola Tinubu’s inaugural address, he announced the removal of the fuel subsidy. “The fuel subsidy is gone. It can no longer justify its ever-increasing costs in the wake of drying resources. We shall instead rechannel the funds into better investment in public infrastructure, education, health care, and jobs that will materially improve the lives of millions,” the President declared.
This announcement led to an immediate spike in petrol prices, jumping from around ₦780 per gallon (approximately $1) to ₦2160 per gallon ($2.80), which in turn caused a significant increase in retail fuel prices.
Following this, rumors emerged that the Nigerian National Petroleum Corporation (NNPC) owed $6.8 billion to oil traders. Initially, NNPC denied these claims through its Chief Corporate Communications Officer, Olufemi Soneye. He stated, “NNPC Ltd does not owe the sum of $6.8bn to any international trader(s). In the oil trading business, transactions are carried out on credit, so it is normal to have outstanding amounts at certain times. However, NNPC Ltd, through its subsidiary NNPC Trading, maintains many open trade credit lines with several traders. The company is fulfilling its obligations on a first-in-first-out basis.”
However, In an Interesting turn of events, on September 1, 2024, NNPC issued a statement admitting it owed its petrol suppliers $6.8 billion, citing financial strains due to the high cost of petrol supply. The statement subtly confirmed that the debt was the reason for the fuel queues in filling stations across the country, stating that it is impacting supply sustainability.
NNPC clarified that for the past 8-10 years, they had not paid subsidies directly. Instead, when they imported PMS at a particular price per unit, the government would instruct them to sell it at half the price. The government sometimes covered the deficit, but other times NNPC had to find ways to manage the shortfall.
Despite rumors of unprofitability, NNPC released infographics showing that the company became profitable in 2020 and made a profit of ₦3.29 trillion in 2023, with dividends of ₦2.2 trillion. Reports also suggest that the Federal Government reintroduced subsidies in August 2023 but still owes NNPC $4.9 billion (₦7.8 trillion) in unpaid subsidies for seven months, dating back to July 2023. The estimated subsidy from August 2023 to December 2024 stands at ₦19 trillion.
“The Government Did Not Lie”
The situation becomes even more complex as NNPC claims profitability but admits to using its revenue to cover subsidy costs—funds that the Federal Government was supposed to pay. In response, President Bola Tinubu approved NNPC to use the 2023 final dividends owed to the federation to offset the cost of petrol subsidies. He also halted the payment of 2024 interim dividends to the Federal Government to help boost NNPC’s cash flow.
Amidst these developments, speculations arose that the Federal Government had been paying subsidies despite previously announcing their removal. Addressing these claims, Bayo Onanuga, Special Adviser to President Bola Tinubu on Information and Strategy, stated on his X handle that the government did not lie about ending fuel subsidies. He argued that no new discoveries or lies were uncovered, asserting that the government remained committed to its policy of discontinuing subsidy payments following President Tinubu’s deregulation of the PMS sector on May 29, 2023.
The Common Man
While the SA’s speech Is rather smooth and well put together on paper, It’s going to take more than mere textbook words to make Nigerians believe In the Federal government. The sole distributor of something as crucial to the nation as fuel, hid and denied the truth for months; yet Nigerians are expected to believe the Federal government didn’t do same.
Ironically, the average Nigerian has little interest in trusting the government at this point. Paramount on their mind Is how to survive this acute hardship brought upon them by the actions and Inactions of the Federal government In collaboration with NNPC.
