The Federal Government of Nigeria could potentially spend around N236 billion each month to subsidize Premium Motor Spirit (PMS), also known as petrol, imported by the Nigerian National Petroleum Company (NNPC) and sourced from the Dangote Petroleum Refinery.
This estimation is based on recent figures provided by oil marketers and statements from key industry stakeholders.
On Monday, Alhaji Aliko Dangote, President and CEO of Dangote Group, called on the government to completely remove the subsidy on fuel. Dangote argued that eliminating the subsidy would help reveal the actual petrol consumption in Nigeria.
His position has received support from the Independent Petroleum Marketers Association of Nigeria (IPMAN) and the Centre for Promotion of Public Enterprise.
Following Dangote’s release of petrol to the domestic market starting September 15, 2024, the refinery has been supplying about 25 million liters of PMS daily.
Reports suggest that over 50 million liters of PMS have already been lifted from the refinery by members of the Major Energy Marketers Association of Nigeria (MEMAN).
NNPC is currently responsible for purchasing all of Dangote’s petrol and selling it to oil marketers at a subsidized rate. Major marketers claim that they purchase PMS from NNPC at N766 per liter, while NNPC reportedly buys the product from Dangote at N898 per liter.
This indicates a subsidy of N132 per liter on Dangote petrol. As a result, the government could be spending N3.3 billion daily, or N99 billion monthly, to subsidize this product.
In addition to locally refined PMS from Dangote, Nigeria still relies on imported petrol to meet domestic demand. The Nigerian Midstream and Downstream Petroleum Regulatory Authority recently reported that Nigeria consumes about 45.7 million liters of petrol daily.
With Dangote supplying 25 million liters, approximately 20.7 million liters of PMS must still be imported to meet total demand.
The landing cost of imported petrol, as of July 2024, was N1,117 per liter, according to MEMAN. Independent marketers currently buy imported petrol from NNPC at N895 per liter, resulting in a subsidy of N222 per liter.
For the 20.7 million liters of imported petrol, this translates to a daily subsidy of N4.59 billion and a monthly cost of about N137.86 billion.
Combining the estimated N99 billion monthly subsidy on Dangote petrol with the N137.86 billion for imported PMS, the government could be spending approximately N236.86 billion each month on petrol subsidies.
Dangote, during an interview in New York, emphasized the need to end the subsidy, stating, “Subsidy is a very sensitive issue. Once you are subsidising something then people will bloat the price and then the government will end up paying what they are not supposed to be paying. It is the right time to get rid of subsidies.”
“But this refinery will resolve a lot of issues out there, you know, it will show the real consumption of Nigeria, because, you know, nobody can tell you. Some people say 60 million litres of gasoline per day.”
