Despite announcing the removal of subsidy on petrol and more than 400 per cent subsequent rise in the price, the Federal Government may be secretly paying an unspecified amount to marketers of the product to maintain the current pump price.

President Bola Tinubu had during his inaugural speech on Monday, May 29, 2023, announced that the era of subsidy payment on Premium Motor Spirit, otherwise known as petrol, was over. This announcement led to an instant rise in the pump price of the commodity from N189 to about N500.

Presently, petrol sells for between N568 and N617 in different parts of the country due to what government officials and the NNPC Limited described as foreign exchange fluctuations as the product is exclusively being imported.

ex-depot price of petrol stood at N580 per litre in Lagos on Thursday and that after adding the cost of conveying it to filling stations and the marketers’ profit margin, it ought to sell for between N620 and N630 per litre. The difference, however, represents the subsidy that the government is surreptitiously bearing despite the fact that there is no budget for that.

It was learnt that jolted by the negative reactions that had been trailing its economic policies, including the astronomical surge in the cost of living occasioned by the removal of fuel subsidy and the floating of the naira, coupled with a possible backlash if the pump price of petrol rose further, the Tinubu administration decided to peg the price at the current rates and instead opted to accommodate some form of subsidy.

A close aide of the President told Saturday PUNCH on condition of anonymity that the administration was scared of losing what remained of its goodwill and support base due to the excruciating pain Nigerians were currently suffering as a result of the President’s policies and their effects on the masses.

The source said, “Ordinarily, the government ought not to be involved in fixing the pump price of petrol in a deregulated economy just as it is with diesel and kerosene, but when we realised how the removal of subsidy on petrol has thrown the citizens into poverty and how fast the administration is losing credibility and goodwill, we had to put on our thinking caps.

“The security reports we are getting are not favourable at all. There is a high probability that there may soon be civil unrest and escalated tension as the citizens have been pushed to the wall. There are indications that the organised labour, civil society and the opposition are planning to plunge the country into a spontaneous crisis that may snowball into protests that if care is not taken may threaten the stability of the government.

“Don’t forget that the election that brought President Tinubu in is still being vigorously challenged by opposition parties, who are mounting massive pressure on the judiciary to overturn the result. Any protest at this time will not augur well for the administration as it will be difficult to contain and may be hijacked by the opposition, and if the presidential election petition tribunal orders a rerun or cancellation of the election for a fresh one to take place, you can imagine what will happen to the Tinubu presidency.

“Yes, the NNPCL and marketers gave feedback about what the ideal pump price of petrol should be, but we reasoned that any further increase will be catastrophic and ignite spontaneous protests nationwide. It will be suicidal for us to watch that happening.”

The Presidency source revealed that this informed the decision of the NNPCL to secure a $3bn crude repayment loan on Wednesday to support the naira and stabilise the foreign exchange market.

The NNPC said in a statement that the commitment letter, which was signed at AFREXIM Bank’s headquarters in Cairo, Egypt, would enable it to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilising the exchange rate market.

The company tweeted, “The NNPC Limited and @afreximbank have jointly signed a commitment letter and Term Sheet for an emergency $3 billion crude oil repayment loan.

“The signing, which took place today at the bank’s headquarters in Cairo, Egypt, will provide some immediate disbursement that will enable the NNPC Ltd. to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilising the exchange rate market.”

The President’s aide explained that the initiative was expected to strengthen the naira and lead to a reduction in fuel costs.

“This means that if the naira appreciates in value, the cost of fuel will drop, and further increases will be halted and there won’t be any need to pay subsidy on the product,” the aide added.

An official of a fuel marketing firm, who spoke to one of our correspondents on Friday, however, insisted that the government was paying subsidy on petrol.

The official, who pleaded not to be identified because of the sensitive nature of the subject, said when the firm brought in the first shipment of its imported petrol after the government liberalised the fuel importation market, the pump price was N617 per litre, but its filling stations were forced to sell at N565.

He said, “Is it not obvious that the government has resumed subsidy payment? No company will bring in petrol and after adding the shipment cost, insurance cost, bridging gap and profit margin and the pump price adds up to N617 and now sells at N565. The government is not telling Nigerians the truth.

“Our ex-depot price as of Monday was N575 and by Thursday, it had jumped to N580. Ideally, we should be selling above N600, say N620 per litre in Lagos, but the Federal Government is saying we can’t increase the pump price, so who pays the differential?

“The business is no longer profitable and that is why a lot of independent marketers are abandoning their filling stations and selling them to major marketers, which have the resources to absorb some of the unexpected volatility.

“Before subsidy removal, it used to cost a tanker about N5m to lift petrol from the depot, but now, the price has jumped to about N25m and the profit margin on that is just around N300,000. So, it is not an encouraging business at the moment.”

The marketers had said on Sunday that the price would rise to between N680/litre and N720/litre in the coming weeks should the dollar continue to trade at N950 in the parallel market.

They also hinted that dealers seeking to import PMS were being forced to put the plans on hold due to the scarcity of foreign exchange to import the commodity.

The warning came barely one week after the local currency crossed the N900/dollar ceiling, with the naira selling at over 945/dollar at the parallel market last Friday.

Oil dealers said the Central Bank of Nigeria’s Importers and Exporters official window for foreign exchange had remained illiquid and unable to provide the $25m to $30m required for the importation of PMS by dealers.

The marketers had in June projected that the pump price of petrol could rise above N700 per litre in the northern part of the country starting from July.

National Controller Operations, Independent Petroleum Marketers Association of Nigeria, Mike Osatuyi, had told The PUNCH that the price could rise to above N700 in the North once independent marketers started importing products.

He said while those living in the northern states could pay as much as N700 and above for one litre of petrol, those outside Lagos should expect to pay around N610, while Lagos residents would pay about N600 per litre.

“What I am seeing is around N600 and above, depending on the exchange rate, the current crude price at the international market and the landing cost. Those in Lagos will pay around N600, those outside Lagos around N600 plus, while those in the North will be paying anything from N700 and above,” he said.

Similarly, a former Chairman of the Major Oil Marketers Association of Nigeria and Chief Executive Officer/Chairman of 11 Plc, Tunji Oyebanji, said consumers should expect new pump prices close to that of diesel, and those of neighbouring African countries that also import petrol.

By coming out to declare that the pump price of petrol will not rise above the N617/litre approved cost, the Federal Government has indirectly reinstated fuel subsidy, oil marketers stated on Friday.

Dealers of the commodity also asked the Federal Government to come out clean with respect to fuel subsidy, instead of mandating oil marketers not to dispense the product above a stipulated band.

The Special Adviser to the President on Media and Publicity, Ajuri Ngelale, had told State House correspondents on Tuesday that the President had instructed that the cost of petrol should not increase.

“Mr President wishes to assure Nigerians following the announcement by the NNPC Limited just yesterday (Monday) that there will be no increase in the pump price of PMS anywhere in the country. We repeat, the President affirms that there will be no increase in the pump price of PMS,” he said.

The NNPCL had on Monday spoken up on the widespread concern of a possible hike in the pump price of petrol.

“Dear esteemed customers, we at (the) NNPC Retail value your patronage and we do not have the intention to increase our PMS pump prices as widely speculated. Please buy the best quality products at the most affordable prices at our NNPC Retail stations nationwide,” the company had stated.

NNPC Retail is the downstream subsidiary of NNPCL that retails refined petroleum products for the group.

Recall that oil marketers had on Sunday indicated that the cost of petrol would rise to between N680/litre and N720/litre in the coming weeks should the spike in the exchange rate persist.

But the National Secretary, Independent Petroleum Marketers Association of Nigeria, Chief John Kekeocha, explained on Friday that the decision of the Federal Government to put a cap on petrol price meant that subsidy on the product had been reinstated.