Nigeria ends subsidy payment on petrol

Nigeria is currently facing fuel scarcity and long queues at petrol stations following President Bola Tinubu's announcement affirming the end of petrol subsidy payments, stating that it is unsustainable. The removal of the subsidy has led to a surge in panic buying and hoarding by marketers, causing an artificial scarcity of the product in the country. Oyeyemi Oke, a Partner at A02 Law, sheds light on the situation in an interview with CNBC Africa. Mr. Oke highlighted that the resurgence of queues at petrol stations is a direct result of the President's speech, which signaled the end of the petroleum subsidy. He clarified that although reports suggest the subsidy was recently removed, budgetary provisions for it had not been made beyond June 2023 in the previous administration. The sudden removal announcement has prompted a market response characterized by panic and scarcity as consumers react to the perceived shock of the subsidy's elimination. Addressing the ambiguity surrounding fuel pricing, Mr. Oke emphasized that without a subsidy, prices would now be determined by market forces of demand and supply. He referenced previous pricing regimes with bands and indicated that total deregulation would likely lead to differential pricing among retailers based on various cost components. The partner also highlighted the positive impact of deregulation, noting a decrease in the price of diesel, or AGO, due to market dynamics. Looking ahead, Mr. Oke suggested that further clarity on pricing and modalities is needed in the coming days to understand how the subsidy removal will unfold. He anticipated that market forces would dictate petrol prices, leading to varying rates among retailers based on operational costs and competitive dynamics. The partner encouraged vigilance in monitoring the situation and advised consumers to brace for potential price fluctuations as the market adjusts to the new subsidy-free landscape. The fuel scarcity situation in Nigeria is a critical issue that underscores the complexities of subsidy removal and deregulation in the oil sector. As the government navigates these changes, stakeholders in the industry and consumers alike will need to adapt to a new pricing paradigm driven by market dynamics.