Nigeria Fuel Subsidies Near $300 Million a Month, NNPC Says
(Bloomberg) -- Africa’s largest crude producer says it won’t phase out gasoline subsidies that are costing up to 120 billion naira ($294 million) per month until negotiations with trade unions are completed.
While Nigeria produces 1.6 million barrels of crude a day, the state-owned Nigerian National Petroleum Corp. imports virtually all its fuel from abroad due to the country’s low refining capacity, reselling it locally at a subsidized price.
The NNPC will maintain the price at which it sells gasoline to wholesalers and retailers “until the conclusion of ongoing engagement with the organized labor and other stakeholders,” a spokesman for the company said in an emailed statement Friday. Meanwhile, the NNPC will continue “bearing the burden of price differentials between the landing cost and pump price,” he said.
The state-owned energy company is absorbing monthly losses of between 100 billion naira and 120 billion naira on Nigeria’s average daily consumption of around 60 million liters of gasoline, the firm’s group managing director, Mele Kyari, said at a media briefing on March 25.
Raising pump prices, let alone allowing them to move in line with international crude markets, is a risky proposition for Nigerian politicians. Many in Africa’s largest economy, which also hosts the highest number of people living in extreme poverty globally, regard cheap fuel as their single dependable benefit from the country’s misspent oil wealth.
President Muhammadu Buhari’s administration is considering ways to cushion the impact of fuel-subsidy cuts once they are finalized. The policy change would lead to deregulation of the downstream sector, opening up the fuel-import business to private companies.
The NNPC is in talks with the Central Bank of Nigeria to provide foreign exchange to private sector players for the importation of gasoline after deregulation, Kyari said. “We expect all oil marketing companies to commence import so that the burden will be taken away from the NNPC,” he said.
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