Cost of petrol subsidy: What NNPC unremitted N4trn can do for Nigerians

The Nigeria National Petroleum Corporation (NNPC) is currently being scrutinised by the Wole Oke-led

The billion naira waste Nigeria incurs fixing its leaking pipelines and subsidising petrol is no longer news, but what is news is the opportunity cost forgone by this waste in a creaking economy.

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The Nigeria National Petroleum Corporation (NNPC) is currently being scrutinised by the Wole Oke-led House of Representatives Committee on Public Accounts (PAC) over an alleged failure to remit N4 trillion into the federation account as contained in a report from the office of the Auditor-General for the Federation.

In response, a representative of the NNPC group managing director, Mele Kyari, justified the deductions by saying that it was in line with the law that established the corporation.

“What we do is backed by the provisions of the law. First, the NNPC Act is very clear that we should submit the net revenues of our cost,” the NNPC told lawmakers at the meeting Wednesday in Abuja.

Umar Ajiya, NNPC’s chief finance officer, who represented the GMD, conceded that “there is confusion within government circles at the moment for which a lot of consultations are ongoing on how to handle the implication of sustained subsidy.”

He was responding to a report by the Auditor-General of the Federation claiming the NNPC did not remit N4 trillion.

The corporation admitted that fuel subsidy and other costs accounted for the shortfall in remittance.

However, the issue has further raised concern about how urgently Nigeria plans to reform its alleged corrupt national oil company through a new oil bill yet to be passed after 20 years of first presentation.

Financial experts have raised concern about the opaque system that is bleeding Nigeria’s economy considering the high level of life-threatening hunger in a country with over 95.9 million people living in extreme poverty.


For instance, Emerald Energy Institute at the University of Port Harcourt estimated the construction cost of a 100,000-barrels per day (bpd) refinery plant at $2 billion (N600bn). This means the unremitted N4 trillion could have helped the country construct at least six of such refineries, instead of importing light petroleum products estimated at $15 billion per annum.

Primary health centre, education

Using Freedom of Information requests and analysis by transparency campaign group Public Private Development Centre, it would cost an estimated N28 million to build primary healthcare centre and N17 million for a 3-classroom block. This means N4 trillion is capable of building 142,857 primary health centres or 235,000 blocks of classrooms needed across Nigeria’s 774 local governments.


Global Market

Price of petrol could rise as uncertainty looms in the global market

On Sunday, 28 February 2020, Nigerian oil marketers announced that Premium Motor Spirit (PMS) or petrol may go on sale for as much as N230 per litre in March.

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The announcement was made after the Nigerian National Petroleum Corporation (NNPC), the same day, assured Nigerians in a press release that despite the increase in the price of crude oil, it has no plans to increase the ex-depot price of petrol in the month of March.

The state-controlled oil company had initially made a similar promise, early in February.

However, most filling stations across the country have reported the presence of a large queue of buys as people engage in panic buying.

The announcement has equally prompted some filling stations to engage in petrol hoarding.

The Federal Government in March 2020, announced the removal of fuel subsidy and full deregulation of the downstream sector of the oil industry, which will allow market forces to determine the price of the product.

According to a report, Mike Osatuyi, the National Operations Controller, Independent Petroleum Marketers Association of Nigeria (IPMAN), “Nigeria has crossed the bridge, there is no hiding place and the N1.2 trillion which was hitherto annual spending on subsidy, will be borne by the market.” 

Further commenting, Osatuyi stated that the rise in the prices of crude oil to $67 per barrel as of Sunday, 28 February makes it normal for the price of PMS to be between N220 per litre and N230 per litre

Currently, the world is expecting the Organization of Petroleum Exporting Countries (OPEC) and its allies to increase oil production as the excess crude that piled up during the pandemic as borders were shut down has disappeared.

As the world rally for more supply of crude oil, traders expect the OPEC+ coalition (led by Saudi Arabia and Russia) to agree to an increase in production when it meets on March 4.

If this is done it would be reversing some of the output cuts made in 2020 by the international body, likely reducing the global crude price and necessitating an increased output that oil-dependent countries like Nigeria could benefit from.

However, Prince Abdulaziz bin Salman, of Saudi Arabia has urged fellow oil-producing states to remain “extremely cautious” as it is not clear what level of impact the COVID-19 (coronavirus) pandemic could have on the global demand for oil if the output is increased.