Strong indications suggest that the Federal Government has quietly reintroduced the fuel subsidy system, as it has been revealed that a subsidy payment of N169.4 billion was made for the month of August.

This payment was aimed at maintaining the pump price at N620 per liter, which was necessary considering the changing dynamics in the global oil market. The international oil benchmark, Brent crude futures, exceeded $95 per barrel, and coupled with the ongoing rapid depreciation of the naira, it became evident that the landing cost of petrol had surpassed the current pump price of N617 per liter.

Towards the end of August, petrol was trading at $1,030.11 per metric tonne on the international market, compared to the $859.25 range in July when the NNPC increased the pump price to an average of N617 per liter. This indicated a significant increase of 19.88%.

In addition, the exchange rate had risen from N820/$ in July to N920/$, marking a 12.19% increase. Crude oil prices had also risen from $78.50 per barrel in July to $88.50 per barrel at the end of August, with the Brent crude futures crossing the $95 mark.

Furthermore, while the price per liter at the international market was $0.641 in July, it had risen to $0.792 by the end of August. This indicated that the landing cost of fuel had reached approximately N728.64 per liter, compared to N529 in July.

When factoring in freight costs, lightering costs (STS), distribution margins, ancillary costs imposed by regulatory authorities such as the Nigerian Midstream Downstream Regulatory Authority (NMDPRA), Nigerian Port Authority (NPA), and Nigerian Maritime Administration and Safety Agency (NIMASA), as well as marketer's margins, the total cost ranged from N90 to N105.

The N169.4 billion subsidy payment for August was reportedly sourced from the dividends paid by the Nigerian Liquefied Natural Gas (NLNG) for the same month. Documents from the Federal Account Allocation Committee (FAAC) confirmed that the NLNG paid $275 million in dividends to Nigeria via NNPC Limited in August 2023. Out of this amount, NNPC Limited utilized $220 million (equivalent to N169.4 billion at N770/$) to cover the fuel subsidy, while retaining $55 million.

The Major Oil Marketers Association of Nigeria (MOMAN) had previously been providing regular pricing updates but suspended this practice. A source within the association mentioned that they were instructed not to share updates because the government had declared that there would be no price increase.

Further investigations revealed that the approval for the N169.4 billion subsidy payment for August came from higher authorities, as confirmed by a senior government official. The official explained that a discreet arrangement had to be made with oil marketers to maintain the current price.

This decision was driven by the understanding that the public could not bear any further increase in the pump price, and any sudden change could have plunged the country into a serious crisis.

The government has taken measures to maintain market stability until issues related to production and the Dangote refinery, as well as outstanding loans, can be resolved. President Bola Tinubu had previously ordered the fuel price to remain at N617 per liter, with the NNPC confirming its commitment to avoiding further price hikes.