March 20, 2020 / 4:15 PM / 5 months ago

UPDATE 1-Nigeria tries to shed fuel subsidy costs while keeping price control

(Adds chart, estimate of subsidy cost)

By Libby George

LAGOS, March 20 (Reuters) - Nigeria is trying to shed costly gasoline subsidies and enable private companies to import for the first time in years as its fuel regulator meets to draft a new price control template.

But oil sources and experts told Reuters the fact that the government will still control prices could mean continued costs.

The subsidies have drained billions of dollars from public coffers, and state oil company NNPC has imported virtually all Nigeria’s gasoline by swapping valuable crude oil cargoes for fuel because private firms could not make money importing it.

A study supported by the British government estimated the government spent 10 trillion naira ($32.63 billion) from 2006 to 2018, more than the individual budgets for health, education or defence.

Nigerian President Muhammadu Buhari’s government has refused to remove caps and announced a price cut this week, which it said would help citizens weather the coronavirus crisis. But the government is also slashing spending due to an oil price crash.

After meeting with importers on Thursday - who stand to lose money from the unexpected, immediate price drop and who have pressed for years for the caps to be removed - regulator PPPRA said it will unveil a system that allows prices to be market-reflective enough that private parties can again import fuel.

“The industry stakeholders declared support for the opportunity given to private sector players to resume importation of (gasoline),” said a statement signed by the Major Oil Marketers Association, the Depots and Petroleum Products Marketers Association of Nigeria and state oil company NNPC.

PPPRA said the specifics of the new system, which it will hash out during a Friday meeting, would see it announce a band of allowed gasoline prices at the beginning of each month starting on 1 April.

Some are sceptical, though, that such a system could free the government of subsidizing the cost of imports.

“Nigeria needs to let go of this obsession with control, price control,” said Tunde Leye, a Lagos-based analyst with SBM Intelligence. “Inevitably oil prices are going to go up. What do we do at that time? We start paying subsidies again.”

($1 = 306.5000 naira)

Additional reporting by Angela Ukomadu in Lagos; Editing by Alexander Smith

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