Sell crude oil at fixed price to reduce local PMS cost, Rewane tells FG

Amidst the rising fuel prices triggered by the ongoing Middle East hostilities, the Managing Director of Financial Derivatives Company, Bismarck Rewane, has advocated for a refinery-based subsidy model that channels benefits directly to consumers. The renowned economist argued that Nigeria’s resource endowment and strategic location provide a strong foundation for a more efficient subsidy system […]

Amidst the rising fuel prices triggered by the ongoing Middle East hostilities, the Managing Director of Financial Derivatives Company, Bismarck Rewane, has advocated for a refinery-based subsidy model that channels benefits directly to consumers.

The renowned economist argued that Nigeria’s resource endowment and strategic location provide a strong foundation for a more efficient subsidy system anchored on domestic refining.

He spoke just as the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), emphasized the need for the Nigerian National Petroleum Company Limited (NNPCL) to improve the volume of crude oil allocated to local refineries to enhance domestic refining capacity in Nigeria.

Daily Trust reports that many Nigerians have been groaning over the surging prices of petroleum products especially the premium motor spirit (PMS) otherwise known as petroleum which now sells at N1255 to N1300 per litre.

The PMS price has almost doubled from N750 per litre it sold prior to the US-Israel war with Iran over a month ago.

Speaking during a session on Nairametrics TV, Rewane noted that rather than maintaining a broad subsidy regime, Nigeria could adopt a targeted approach by leveraging local refineries to stabilize fuel prices and reduce inefficiencies.

Rewane explained that the proposed model would involve the government supplying crude oil to domestic refiners at a controlled price, while ensuring that refined petroleum products are sold to consumers at lower rates.

“Nigeria will actually sell oil to the refiners at a particular price and insist that the refiners bring down their price and pay the difference,” he noted.

According to him, this approach would allow the government to focus on supporting a limited number of refiners instead of subsidising the entire fuel supply chain.

“It is more efficient for Nigeria to pay three or four refineries to keep going and for them to transfer the subsidies to the consumers.”

He also highlighted Nigeria’s structural advantages, including its oil and gas resources and geographic positioning, as factors that support the feasibility of the model.

Rewane’s proposal comes amid ongoing debates following the removal of the petrol subsidy, a policy shift aimed at reducing fiscal pressure and eliminating distortions in the downstream sector.

While subsidy removal has improved government finances, it has also led to higher fuel prices and increased inflationary pressures, affecting households and businesses.

Rewane also linked the proposal to rising global oil prices, noting that increased revenues could provide the fiscal space needed to sustain such a system.

“Nigeria is going to double its oil revenues because the price of oil has gone up. You must be able to recycle the oil windfall into the pockets of the people.”

On his part, PETROAN President, Dr.Billy Gillis-Harry advised the NNPCL to ensure the immediate commencement of production at the Port Harcourt Refinery and Warri Refinery to enhance local refining capacity and reduce dependence on imports.

He added: “The GCEO should find time to undertake operational visits to the Port Harcourt, Warri, and Kaduna refineries to assess progress firsthand, engage with stakeholders on ground, and reinforce commitment to their timely and sustainable functionality.”

It should also improve stakeholder engagement through regular consultations and inclusive decision-making processes across the downstream sector.

He further said the NNPC should consolidate and strengthen pipeline security architecture to boost and increase Nigeria’s crude oil production.

He urged the NNPCL leadership to deepen inclusiveness in policy implementation, especially in areas affecting product allocation, logistics, and infrastructure development.