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Fuel subsidy removal disrupts Nigeria’s oil retail market



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In response to President Bola Tinubu’s pronouncement on ending the subsidy on Monday, the petrol pump price in Nigeria has jumped to a rough average of N600 per litre (US$1.3 per litre) from the N195 per litre before the inauguration speech, a development that has caused a double fold increase in transport fares accompanied by long filling station queues.

Different regulatory agencies and marketers’ associations have also responded to these developments.

The CEO of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Farouk Ahmed, has said the move to remove subsidy was in line with the PIA and the authority would not place any price cap on the sale of the products.

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The GCEO of the NNPCL, Mele Kyari, has also backed the removal, saying it would free up funds for the company’s optimal operations. This suggests that the existing under-recovery model has continued under the new NNPCL.

Meanwhile, while the Major Oil Marketers Association of Nigeria (MOMAN) and the Depot and Petroleum Marketers Association of Nigeria (DAPPMAN), who own tank farms, supported the removal, the Independent Petroleum Marketers Association of Nigeria (IPMAN) has a contrary option, arguing for wider consultation and the operations of the refineries before the removal.

Analysts argue that the president’s inauguration speech pronouncement has effectively ushered in an actual subsidy removal policy as marketers, including the NNPCL, have more than doubled their petrol pump prices ahead of the actual subsidy removal.

This, however, contradicts the most recent disposition of the FG on maintaining the subsidy till the scheduled end of June. But analysts say the conflicting messages and uncertainty in the system would promote the exploitation of Nigerians, heighten inflationary pressure, and deter investment in the sector.

The downstream regulator must intervene decisively to provide the requisite pricing template as provided in section 206(2) of the PIA for system stability.

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