The subsidy, which the NNPC prefers to call ‘value shortfall’ or ‘under-recovery’, resurfaced in January this year as the government left the pump price of petrol unchanged at N162-N165 per litre despite the increase in global oil prices.

The Federal Government had in March 2020 removed petrol subsidy after reducing the pump price of the product to N125 per litre from N145 following the sharp drop in crude oil prices.

The PUNCH had reported on August 9 that the landing cost of petrol imported into the country increased to a new high of N249.42 per litre on July 30 from N240.17 per litre as of June 25.

The Nigerian National Petroleum Corporation, which has been the sole importer of petrol into the country in recent years, has been bearing the subsidy cost since it resurfaced.

Data from the corporation showed that it incurred N25.37bn subsidy in January, N60.40bn in February, N111.97bn in March, and N126.30bn in April and N114.34bn in May.

The subsidy cost rose from N143.29bn in June to N175.32bn in July, according to the NNPC.

In a document seen by our correspondent, the national oil company said, “Out of the value shortfall of N143,286,281,752.62, the sum of N103,286,281,752.62 was applied on the gross domestic receipts before arriving at the net receipt of N67.28bn in order to make funds available for JV cost recovery to sustain the existing production level. The balance of N40bn will be deducted in subsequent months.

“The July 2021 value shortfall of N175,317,701,294.80 & outstanding balance of N40bn will be deductible from the August 2021 proceeds due for sharing at the September 2021 FAAC meeting.”

While marketers have continued to stress the need to allow market forces to determine the pump price of petrol and do away with subsidy, it remains uncertain whether the discussions between the Federal Government and labour unions will lead to the deregulation of petrol prices.

The NNPC, which has been the sole importer of petrol into the country in recent years, is still being relied upon by marketers for the supply of the product.

“Nigeria’s continued subsidy on imported petrol (estimated at N5.5bn daily), over a year after it attempted to fully deregulate the downstream oil sector, is perhaps its biggest revenue leakage,” analysts at Financial Derivatives Company Limited, led by Mr Bismarck Rewane, said in their latest monthly economic report.

They noted that International Monetary Fund, at its June 1-8, 2021 meetings with Nigerian authorities, underlined the importance of doing away with subsidies completely, particularly in the context of low revenue mobilisation.

The analysts said, “While petrol subsidies are just one of several other subsidies (electricity, fertiliser, foreign exchange) that exist in Nigeria’s economic system, its removal is likely to face the most pushback.

“The Petroleum Industry Bill, as passed by the National Assembly, contains sections that ensure the disappearance of subsidies, and it remains to be seen if labour unions and civil society groups can be convinced that it is in the best interest of Nigerians.”

They said if petrol subsidies were done away with, an estimated N2tn would be added to government revenue to be shared by the three arms of government.