Nigeria increased petrol prices from 189 naira per litre to 557 naira ($1.21) on Wednesday. The move comes after new President Bola Tinubu stated that subsidies in fuel will be done away with.
In a statement, state oil company NNPC stated that petrol prices were being modified “in line with the current market realities.” It said, “It is pertinent to note that prices will continue to fluctuate to reflect market dynamics.” The hike means that the fuel subsidy system, which NNPC claims costs it $867 million a month, has come to an end.
Transport expenses in Nigeria will increase and businesses that rely on fuel generators to supplement the sparse grid electrical supply will have to pay more.
With the people struggling economically, they expect that subsidized petrol is their right and so in 2012 when the then government attempted to scrap subsidy on petrol, Nigeria erupted in protest. However, the now President Tinubu had opposed the removal of subsidy back in 2012 when he was an opposition leader.
Before the anticipated termination of the subsidies that had been keeping prices low, drivers rushed to fill up their tanks.
The federal government owes NNPC $6.1 billion in fuel subsidy payments, according to the corporation’s chief executive, who also said on Tuesday that Nigeria could no more afford to pay the subsidies.
Petrol was being sold at NNPC-owned fuel stations for 448 naira a litre in some areas of Lagos, up from 185, and for 537 naira in Abuja.
Commenting on the latest decision President Bola Tinubu, credit rating agency Moody’s said that the decision to do away with the subsidy and make Nigeria’s multiple exchange rates collectively as on was “credit positive”. However, Moody’s also alerted that this decision could lead to risks initially, like higher inflation, poorer economic growth, and increased social unrest.
