Nigeria’s state oil firm is spending up to $315 million a month on fuel subsidies for consumers, a burden that is becoming untenable, its head said on Thursday.

Nigeria deregulated its downstream oil sector a year ago, after the Covid-19 pandemic triggered a collapse in the global price of oil, its main export.

That ended a system of fuel subsidies that had helped keep the lid on simmering social unrest for decades. But the Nigerian National Petroleum Corporation (NNPC) picked up the tab after the government made it the country’s sole petrol importer.

Its managing director, Mele Kyari, said NNPC was paying a market price of 234 naira a litre for petrol and selling at a pump price of 162.

That added up to a cost to the company of between 100 billion-120 billion naira ($262 million-$315 million) a month.

“NNPC may no longer be in a position to carry that burden because we cannot continue to carry it in our books,” Kyari told reporters in the capital Abuja.

Despite the cost to NNPC, pump prices have risen by around 30% since last March, helping to drive rising social unrest in a country where jobs are scarce and attacks by a patchwork of militant groups have turned some regions into near-anarchy.

Kyari said rising oil prices since last year have increased the cost of petrol imports, stoking inflation and creating some social unrest, issues that were being discussed with labour unions.

Efforts were continuing to create a system under which consumers could pay the actual petrol price without getting exploited.

Nigeria, Africa’s top oil exporter, has made producing its own fuel a priority for years but efforts to revamp its refineries have failed, leaving it almost entirely reliant on imports.

NNPC said it recorded a trading surplus of 80.12% to 24.19 billion naira in December from a month earlier.

Reuters