The Nigerian Natonal Petroleum Corporation (NNPC) said it spent a record N5.34 billion about ($14 million) as subsidy for fuel in June, months after it adopted a price modulation template that was expected to end the regime of fuel subsidy in the nation’s oil and gas industry.
NNPC outlined the “under recovery” bill in its June monthly statement, a term used to reference money lost through fuel sales.
The NNPC spokesman, Kennie Obateru, said the costs represented temporary payments to marketers, who buy imported fuel and then sell it on, for stocks they held when the subsidy was removed, and would be spread over six months.
“Since the subsidy removal started with reduction in pump price, marketers have to be paid the differential of the (government) verified stock they held,” he told Reuters.
In March, amid a global oil price crash, Nigeria cut its gasoline pump price and said it had eliminated subsidies through a new price cap that maintained government control, but allowed prices to move with the market forces.
The Corporation hadkept fuel prices artificially low at N145 naira ($0.48) per litre. A study supported by the British government estimated Nigeria spent N10 trillion on subsidies from 2006 to 2018, more than the individual budgets for health, education or defence. But in the past, riots have broken out merely over rumours of any increase.
The body tasked with setting pump prices, PPPRA, has not published retail prices since March 31. Fuel importers said there is a set monthly depot price, but it is not widely distributed. Those who want to know it have to visit the depot.
The lack of transparency around the new gasoline pricing mechanism has been a point of contention for those monitoring whether the subsidy cost has been permanently eliminated and is one of the sticking points over a much-needed World Bank loan.