Petrol price variations show inefficiency of subsidy regime

Al Utsaha, who traveled from Makurdi to Abuja on Saturday, January 28, purchased fuel at three different prices. He bought petrol at N305 per litre at a filling station in Northbank, Makurdi. On getting to Ado-Mararaba in Nasarawa State, he purchased a litre at N320. He then went on to buy it at N194 at the NNPC filling station along Zuba-Giri road on Sunday, January 29.

He noted that across most of the filling stations in Makurdi, petrol was sold between N250 and N310 per litre, while in Abuja it went between N190 and N230 per litre

While the official pump price of premium motor spirit (PMS) or fuel announced was N165 per liter, there are reports of a silently approved price of N185 per litre. Motorists are compelled to purchase the product at different prices across the country, higher than N185 per litre. 

However, the product is subsidised for citizens. The country spent N2.04 trillion to subsidise fuel in 2022 and is spending N3.3 trillion for the first six months of 2023 for the same purpose.

Yet, most filling stations across the country sell petrol above N185 per liter.

In Uromi, a city in Edo State, Joshua Mejebi, when buying from a filling station owned by an independent marketer, gets a litre at N280. However, the price is higher at N320 per liter whenever he buys from those owned by retail marketers.

The situation in Umuahia, Abia State, is similar as Ikpo Chukwuemeka purchased a liter of fuel between N350 to N370 at the filling stations he had visited in the last three weeks. He said that the NNPC station in the town sold at the regulated price.

The situation with the NNPC filling station in Enugu is same as Umuahia. Emeka Stanley said most of the filling stations he had purchased fuel from in the last two weeks sold between N320 and N360 per liter.

Yahaya Haruna, who lives in Gombe, Gombe State, usually buys a litre of fuel between N265 and N295 at filling stations. He, however, noted that a liter goes for N189 at the NNPC station in the city.

Residents of Port Harcourt, Rivers State, buy a liter between N350 and N400 in most of the filling stations in the city, according to Dataphyte findings. Nnenna Nancy regretted that residents were compelled to pay that high for a litre, which she considered unfair.

In the ancient city of Ibadan, Ponmile Orija said motorists had been buying a litre of fuel from filling stations between N270 and N300 for some time now.

The situation is similar in Jos, Calabar, and Agulu in Anambra State. In these locations, fuel is sold between N290 and N350 per litre.

This situation questions the Federal Government’s subsidy payment claim as the marketers sell above the approved price. It shows that the government is simply wasting money on a product that is sold at market prices, economists say.

Experts speak

An oil and gas consultant, Mr Henry Adigun, noted that the price differential had existed as far back as 2012, though not at the current margin. “Over the years, only Lagos and Abuja enjoy the product at the subsidised price,” he said. He pointed out that there had never been a time when petroleum products pricing under a subsidy regime had been the same.

According to Adigun, it did not mean there was no subsidy, but it could be attributed to some factors, the topmost of which was subsidy inefficiency. By this, he meant the product had different subsidy prices for other locations, hence the price differential.

Also, he pointed out that the supply chain played a vital role in the final price. In his words, “Until Nigeria can find an efficient supply chain that works in other countries where subsidies exist, the prices will never be the same.”

He added that corruption along the supply chain must be addressed, as this also weighed in on the final prices at different locations.

An economist, Umar Yahaya, explained that the price differentials provided the basis for subsidy removal, stressing that the government was wasting public funds on a fraudulant scheme.

“It is an an opaque and corrupt system. A lot have been said already about removing the subsidies and moving the money to critical areas of the economy.”