President Muhammadu Buhari has made it clear that his administration can no longer afford to subsidize Premium Motor Spirit (PMS) or petrol.

Which essentially means that the price of petrol at the pumps will henceforth be determined by market forces of demand and supply.

On September 2, 2020, the Petroleum Products Marketing Company (PPMC) announced that petrol will now be dispensing for N151 per liter at gas stations, up from N145 per liter.

In March, the price dipped to N121 per liter due to the crash in global oil prices occasioned by the coronavirus pandemic and shutdowns of entire economies. 

In May, the price was reviewed upwards to N125 per liter.

Between June and July, the price of petrol had returned to between N140, N143 and N145 per litre.

ALSO READ: Nigerians are not so sure about whether they want petrol subsidy payment to continue or not

Social media users, opposition political parties and civil rights groups have kicked against the new price regime of N151 per liter or N162 per liter, as citizens groan under the weight of multiple taxation, a hike in electricity tariff, double digit inflation and an economy still reeling from the damage of the coronavirus pandemic.

Buhari has however said the subsidy era should be considered gone for good, because the federal government can no longer afford to bear the weight of subsidies. 

“There is no provision for fuel subsidy in the revised 2020 budget, simply because we are not able to afford it, if reasonable provisions must be made for health, education and other social services. We simply cannot sustain petroleum subsidy,” the president said.

Ending the subsidy regime was always going to be a politically dangerous move -- a string of rebounds in global oil prices could rouse the opposition and test the administration’s resilience.

Previous attempts, noticeably in 2012, to wean Nigerians off cheap gasoline led to major anti-government protests on the streets.

Minister blames opposition

Information and Culture Minister, Lai Mohammed, has berated the opposition for playing politics with the recent hikes in petrol pump price and electricity tariff.

“The opportunistic opposition and their allies are playing dirty politics with the issue of petrol pricing and electricity tariff.

"Please note that these naysayers did not complain when the price adjustment led to lower petrol prices on at least two occasions since March,” Mohammed said.

“Yet, the government has had to sustain expenditures, especially on salaries and capital projects.

“One of such difficult decisions, which we took at the beginning of the COVID-19 pandemic in March – when oil prices collapsed at the height of the global lockdown – was the deregulation of the prices of PMS.

“As I said earlier, the benefit of lower prices at that time was passed to consumers. Everyone welcomed the lower fuel price then. Again, the effect of deregulation is that PMS prices will change with changes in global oil prices.

“This means quite regrettably that as oil prices recover, there will be some increases in PMS prices. This is what has happened now.”

Electricity tariff hike

Mohammed also explained why electricity tariff had to be reviewed upwards.

“The truth of the matter is that due to the problems with the largely-privatized electricity industry, the government has been supporting the industry,” he said.

“To keep the industry going, the government has so far spent almost N1.7 trillion, especially by way of supplementing tariff shortfalls.

“The government does not have the resources to continue along this path. To borrow just to subsidize generation and distribution, which are both privatized, will be grossly irresponsible.”

The minister said the government is not unmindful of the economic toll of the recent policies on the citizens, adding that “we certainly will not inflict hardship on our people.”

Bloomberg reports that deregulation will save the Buhari administration at least $2 billion a year, at a time when Africa’s biggest crude oil producer needs all the funds it can get to revive an economy badly hit by the COVID-19 pandemic.

All of Nigeria's refineries are near-comatose, functioning at a fraction of their installed capacities, meaning that Africa's number one oil producer has to export crude oil and import the finished product for the local market.