Two days after President Tinubu’s inaugural speech, Nigerians woke up to petrol prices more than double the previous official pump price at NNPC fuelling stations, while incomes have remained static.
However, not just prices have changed; Nigeria’s petrol price methodology has also shifted. We’ve gone from a regime where the government mostly unilaterally fixed prices to one where market conditions and demand and supply determine prices.
This means the prices publicised by the NNPC three weeks ago might not be the same ones you’ll see today or next month. As such, it’s essential to consider the new methodology for determining petrol prices and the factors that matter.
First, a brief look at why the petrol subsidy had to go.
Farewell petrol subsidy
The chart below shows how Nigeria’s petrol subsidy expenditure ballooned to over ₦12 trillion in eight years.
But pay close attention to the past three years, and you’ll see exactly when the subsidy became a weight around the government’s neck.