By Milcah Tanimu
President Bola Tinubu’s administration recently deregulated petrol pricing and removed subsidies. This change led the Nigerian National Petroleum Company Limited (NNPC) to raise fuel prices nationwide. The move brings both positive and negative effects for Nigeria’s economy and citizens.
On Wednesday, NNPC stopped being the exclusive off-taker of petrol from the Dangote Refinery. This refinery can process 650,000 barrels per day. NNPC has historically acted as the sole importer and supplier of petrol in Nigeria. With this withdrawal, the NNPC increased pump prices across the country. In Lagos, the price rose to N998 per litre from N855. In Abuja, it increased to N1,030 from N897.
Before this adjustment, NNPC bought petrol from Dangote at N898 per litre and sold it to marketers at a subsidized rate of N700. Now, it buys from the refinery at N977, reflecting current international market prices.
President Tinubu first attempted to end the petrol subsidy during his inauguration on May 29, 2023. He declared, “Subsidy is gone.” However, this policy faced challenges. NNPC accrued debts of $6.8 billion to offshore suppliers due to the reversal of subsidy removal. This rollback caused petrol supply challenges, leading to shortages and long queues at filling stations.
Since May 2023, petrol prices have surged by over 430% under the current administration.
The Gainers
The main beneficiaries of this new market-driven pricing model include oil marketing companies, NNPC, and the government. Oil marketers, such as the Major Energies Marketers Association of Nigeria (MEMAN) and the Independent Petroleum Marketers Association of Nigeria (IPMAN), welcome the deregulation. They believe it fosters investment, competition, and innovation in the downstream sector.
The new regime should enhance NNPC’s profitability and operational efficiency. It allows NNPC to recover from its previous losses. The government expects to save trillions of naira currently spent on importing petrol at a loss. This change may also reduce arbitrage and discourage smuggling to neighboring countries with higher prices.
Mr. Tunji Oyebanji, a former MEMAN chairman, stated that removing the subsidy became essential. The government could no longer bear the burden. He added that selling crude oil to local refineries in naira at a fixed exchange rate would stabilize consumer prices amidst fluctuations.
Chinedu Ukadike, IPMAN’s spokesperson, confirmed that the new pricing template reflects a fully deregulated oil and gas sector under the Petroleum Industry Act.
The Losers
Despite justifications for the subsidy removal, many see the policy as harmful to citizens. Rising petrol prices will likely trigger hikes in food, transportation, and essential services. This increase comes at a time when many Nigerians already struggle with stagnant incomes.
Artisans, commercial drivers, and households that depend on petrol face serious challenges in coping with the escalating costs. With food and transportation prices already high, many worry about low-wage workers. They still await the new minimum wage of N70,000.
Labour Reaction
In response to the fuel price increase, the Nigeria Labour Congress (NLC) has called for an immediate reversal. They argue that the hike exacerbates poverty among the populace. NLC President Joe Ajaero expressed disappointment. The administration continues to raise pump prices without adequate support for citizens.
NECA and Analysts Condemn the Policy
Mr. Adewale-Smatt Oyerinde, Director General of the Nigeria Employers’ Consultative Association (NECA), stated that the price hike could further erode Nigerians’ purchasing power. It will strain both formal and informal businesses. Dr. Muda Yusuf, CEO of the Centre for Promotion of Private Enterprises, described the increase as poorly timed. He emphasized the need for social considerations alongside economic policies.
He argued that the Nigerian economy is not yet prepared for complete deregulation. The social costs of such decisions are significant, especially given the weak safety nets for over 100 million Nigerians living in poverty.
