Nigeria’s President Muhammadu Buhari has indicated that the rising cost of crude oil will increase the cost of Nigeria’s gasoline subsidy by nearly ten times what it had originally budgeted.
In a letter sent to the National Assembly, President Buhari has called on lawmakers to increase the amount budgeted to continue subsidizing the price of petrol.
The petroleum motor spirit (petrol) subsidy is now set to cost about N4trillion this year, or $9.6 billion. This compares to Nigeria’s previous projections, which called for just N443billion in gasoline.
A report by OilPrice.com last weekend said even though Nigeria is Africa’s largest producer of crude oil, the high price of crude oil comes with drawbacks, stressing that the country swaps at least a portion of its crude oil for gasoline—which it then sells at a loss.
Nigeria imports nearly all of the gasoline it consumes. And with today’s high prices, the country is selling this gasoline at a very steep loss in order to keep gasoline prices at N162.5 per liter (39 cents).
For perspective, in 2020, Nigeria’s petroleum imports exceeded its exports by $43 billion.
Quoting the letter dated April 6, Bloomberg said President called on lawmakers to increase the amount budgeted to continue subsidizing the price of fuel.
Nigeria is in the midst of a fuel crisis that has witnessed long queues at filling stations all over the country, in part due to failure of the administration to repair existing refineries or build new ones, and for the reason of the importation of toxic fuel in February.
President Buhari had promised to end fuel subsidies in February 2022, but later reversed the decision, extending the directive for 18 more months to avert threats from Labour.
Nigeria has just four crude oil refineries with a combined nameplate capacity of 445,000 bpd – enough to meet domestic demand. But the state of disrepair of the refineries means it must still import 80% of all its refined products.
It is noteworthy that a new 650,000 bpd refinery by Africa’s richest man, Aliko Dangote, located in Lekki near Lagos, has proposed to open for business in the fourth quarter of this year.
Be the first to know when we publish an update
