Nigeria, Africa’s largest crude producer says it is spending up to N120 billion (about $294 million) monthly on fuel subsidies, according to Bloomberg.
While the country produces 1.6 million barrels of crude a day, the state-owned Nigerian National Petroleum Corporation (NNPC) imports virtually all its fuel from abroad due to the country’s low refining capacity, reselling it locally at a subsidised price.
“Our current consumption and evacuation from the depots is about 60 million litres a day,” NNPC Group Managing Director Mele Kyari said at a briefing Thursday. “We are selling at 162 Naira ($0.40) a litre, compared to actual market price of around 234 Naira,” he said.
That amounts to a subsidy of about 100 billion Naira to 120 billion naira a month, according to Kyari.
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. The policy change would lead to a 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 (CBN) to provide foreign exchange to gasoline importers 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.