In a recent letter to MPs, Nigeria’s President Muhammadu Buhari stated that the rising cost of crude oil will boost the cost of the country’s fuel subsidy by roughly ten times what was initially budgeted. The letter, which was received by the National Assembly last week, urged lawmakers to increase the budgeted amount for subsidizing fuel prices.
Nigeria’s Petroleum Motor Spirit subsidy is now expected to cost 4 trillion naira ($9.6 billion) this year, up from previous estimates of only 443 billion naira in fuel subsidies. Nearly all of the fuel consumed in Nigeria is imported. And, given today’s high costs, Nigeria is selling this fuel at a significant loss to maintain the 162.5 Naira per litre price (39 cents).
Although Nigeria is a big crude oil producer, the high price of crude oil has had negative consequences for Africa’s largest crude oil producer. At least a percentage of Nigeria’s crude oil is exchanged for gasoline, which it subsequently sells at a loss.