SPE Chair Forecasts N6trn Annual Fuel Subsidy on Rising Oil Price

Peter Uzoho 

The Chairman of Society of Petroleum Engineers (SPE) Nigeria Council, Prof. Olalekan Olafuyi, has predicted that Nigeria’s petrol subsidy may rise to N6 trillion if the oil price continues with the pace at which it is currently rising.

Olafuyi, who is also a lecturer and consultant at the University of Benin, said the skyrocketing crude price and the resultant increase in Nigeria’s subsidy bills had strengthened the case for Africa’s largest oil producer to fully deregulate the downstream sector to pave the way for market forces to drive petrol prices.

The SPE chair made the prediction in Lagos during an interview with journalists on the sidelines of the maiden SPE Women Leadership Lecture Series in commemoration of the 2022 International Women’s Day (IWD), with the theme “Breaking the Biases: Accelerating Business and Economic Growth through Inclusion.”

Nigeria’s fuel subsidy is estimated to be around N3 trillion for the year 2022, according to the Nigerian National Petroleum Company (NNPC) Limited.

The federal government had planned to jettison the petrol subsidy regime by the second half of this year, but later in January backtracked and deferred it for 18 months, citing wrong timing and the hardship such policy decision would have on poor Nigerians.

However, with the oil price hitting over $130 per barrel last week, with signs of continued rise and the cost of importing petrol also going up, following the ongoing war between Russia and Ukraine, the SPE chair explained that the subsidy may soon increase from the current N3 trillion to N6 trillion.

Owing to this, he advocated for total deregulation of the downstream to save the country the huge burden it is carrying to subsidise petrol and to enable the country get the real value of its hydrocarbon resources. 

He said: “For me personally, not as SPE opinion, everything should be deregulated. Trust me, if you really want to get the value from our oil, deregulation is the way to go. We all go overseas.  Now, a gallon of fuel is $3.18 in the US. Calculate it with the naira, it’s almost like $1 per litre and that’s about N580.  

“What you use is what you pay for. Now, people in the US are selling their cars that are V-8 and Nigerians are buying the V-8 cars because it’s easy to fuel. So, if you allow willing-buyer-willing-seller to operate, refineries will come up. Everybody will come and invest. “