ABUJA, May 30 (Reuters) - Nigeria's government could no longer afford to pay for a costly fuel subsidy as of Tuesday, the chief executive of state oil firm NNPC Ltd said, a day after new President Bola Tinubu said the subsidy would be scrapped.

Removing the subsidy, which cost about $10 billion last year, was one of Tinubu's campaign promises, but the last time a government tried to end it in 2012, it led to protests.

"The reality is that from today the government can no longer afford to pay for fuel subsidies as a nation," Mele Kyari, the NPPC chief executive told reporters after a meeting with Tinubu.

He said NNPC was owed 2.8 trillion naira ($6.1 billion) in outstanding subsidy payments by the government.

Kyari's comments came afer long fuel queues returned to Nigerian cities as motorists rushed to fill their tanks while some retailers hiked prices amid uncertainty on the timing of the removal of the subsidy.

Tinubu said on Monday there was no provision for the subsidy in the budget, adding "so fuel subsidy is gone." Many Nigerians took that to mean the subsidy would be immediately removed.

Kyari said although there was provision for the subsidy in the 2023 budget up to June 30, there was no money to fund it.

In his first day in office, Vice President Kashim Shettima told reporters the subsidy was a "scam", adding there would be "fierce opposition from those benefiting from the subsidy scam."

The main labour union urged Tinubu to reconsider removing the subsidy.

NNPC says it is spending 400 billion naira ($867 million) monthly on subsidising the petrol price.

In the main cities of Lagos and Abuja, motorists jammed outlets that sold at the regulated price of 185 to 195 naira a litre. But some were selling petrol for as much as 500 naira.

"They have increased the price in most places and now I have to join this long line to buy at the normal price," said Adebisi Kolade, who had clocked up two hours in the queue.

Nigeria's fuel regulatory agency said in a statement it was working with NNPC to guarantee a smooth transition that avoids supply disruptions.

Reporting by MacDonald Dzirutwe in Lagos, Felix Onuah in Abuja and additional reporting by Camillus Eboh in Abuja and Tife Owolabi in Yenagoa; Editing by David Evans

Our Standards: The Thomson Reuters Trust Principles.

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