The National President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) Festus Osifo says the Federal Government is still paying subsidy on petroleum.
President Bola Tinubu had in his inauguration declared that the subsidy era is gone, triggering a hike in the cost of the commodity across the nation.
But months after the move, Osifo, who is also the president of the Trade Union Congress (TUC), said due to the cost of crude oil in the international market and the dollar to naira rate, the government still pays subsidy for the product.
“They [government] are paying subsidy today,” he said on Channels Television’s Politics Today on Friday.
“In reality today, there is subsidy because as of when the earlier price was determined, the price of crude in the international market was somewhere around $80 for a barrel. But today, it has moved to about $93/94 per barrel for Brent crude. So, because it has moved, then the price [of petroleum] also needed to move,” the PENGASSAN boss added.
For the government to stop subsidising petroleum, he said two things must happen.
“The only reason the price will not move is when you are able to manage your exchange rate effectively and you are able to pump in supply and bring down the exchange rate,” Osifo maintained.
“So, 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 fuel subsidy had been in place for decades and kept petrol prices artificially low in what was seen by many Nigerians as one of their benefits from the government.
However, the measure costs the country billions annually because although Nigeria is a major petroleum producer, it imports most of its fuel needs due to its lack of refineries.
President Tinubu acknowledged the challenges facing Nigerians in the wake of the subsidy removal but in July rolled out measures to cushion the impacts.
To “reduce the burden”, he pledged at least $264 million for agriculture, $165 million for small and medium-sized businesses, and $99 million for manufacturing.
“In the short and immediate terms, we will ensure staple foods are available and affordable,” he said.
“To this end, I have ordered the release of 200,000 metric tonnes of grains from strategic reserves to households,” Tinubu added.