The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has confirmed that the government is still paying petrol subsidies due to the cost of crude oil on the international market and the exchange rate.
On his first day in office, President Tinubu declared the withdrawal of fuel subsidies, resulting in an increase in petrol prices from N197 to N480 and N570. Following that, the pump price was raised to N620.
However, there were reports that the price will rise higher owing to global oil market fluctuations. The federal government was said to have interfered to prevent further increases in pump prices, although the administration disputed this.
Festus Osifo, National President of PENGASSAN, said on Channels Television’s Politics Today that the government still pays petrol subsidies due to the cost of crude oil on the international market and the exchange rate.
“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 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.