According to the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), the federal government has not completely removed the fuel subsidy as it claims.
Festus Osifo, National President of PENGASSAN, explained on Channels Television’s Politics Today that the subsidy is still in place because of the high cost of crude oil in the international market and the exchange rate. He said this is why the pump price of petrol has increased from N197 to N620 since President Tinubu took office and announced the subsidy removal.
“They [government] are paying subsidy today. In reality, today, there is a subsidy because, as of when the earlier price was determined, the price of crude in the international market was around $80 for a barrel. But today, it has moved to about $93/94 per barrel for Brent crude. So, because it has moved, the price [of petroleum] also needed to move,” he said.
He also said there are indications that the price may rise further due to the volatility of the global oil market. The government has denied intervening to prevent a hike in fuel price, but PENGASSAN insists that the subsidy is still being paid.
He said two things must happen before the government can stop subsidising petroleum.
“The only reason the price will not move is when you can manage your exchange rate effectively and pump in supply and bring down the exchange rate.
“If the exchange rate comes down today, we will not be paying subsidy. But with the exchange rate value and the price of crude oil in the international market, we have introduced subsidy,” the PENGASSAN boss said.
The return of fuel subsidy is a major setback for Tinubu’s economic reform agenda. It is also likely to lead to increased government spending and deficit.