Outrage on Thursday greeted fresh revelations on how the Federal Government has been secretly running a subsidy regime regarding petroleum products when the Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Mele Kyari, disclosed that the administration currently subsidises the cost of premium motor spirit (PMS), also known as fuel, with about N120 billion ($263,248 million) monthly.
Kyari stated this during the weekly media briefing organised by the Presidential Communication Team at the State House, Abuja.
It would be recalled that Minister of Finance, Budget and National Planning, Zainab Ahmed, had on January 12 during a virtual public presentation of the breakdown and highlights of 2021 Appropriation Act in Abuja said, “We are not bringing back fuel subsidy. We didn’t make provision for fuel subsidy in the budget.
The impact of what was done was reducing some of the cost components that were within the template. And also related to it, on matters of electricity subsidies, no provisions have been made for subsidy for fuel and no provisions have been made for subsidy for electricity.”
According to the GMD, the NNPC has been absorbing the cost differential which is detailed in its financial statements.Kyari further explained that while the actual cost of importation and handling charges amounted to N234 per litre, the government was selling at N162 per litre.He, however, said the NNPC could no longer afford to bear the cost, adding that sooner or later Nigerians would have to pay the actual cost for the commodity.
Kyari, who avoided calling the payment a subsidy, said the NNPC pays between N100 and N120 billion a month to keep the pump price at the current levels, insisting that market forces must be allowed to determine the pump price of petrol in the country.
“Our current consumption is— evacuation from our depots is about 60 million litres per day.We are selling at N162 per litre. Current market price is N234.”
“This is a simple arrangement you do. If you want exact figures from our book, I do not have it at this moment but it’s between N100 billion and N120 billion per month.We are putting the difference in the books of NNPC and we cannot continue to bear it.”
“Today, NNPC is the sole importer of PMS. We are importing at market price and we are selling at N162 per litre today.Looking at the current market situation, the actual price could have been around N211 that you mentioned and around N234 to the litre.The meaning of this is that consumers are not paying for the full value of the PMS that we are consuming and, therefore, somebody is bearing that cost.
“As we speak today, the difference is being carried in the books of the NNPC and I can confirm to you that NNPC may no longer be in a position to carry that burden because we cannot continue to carry it in our books.
“That is why early last year, the full deregulation of the PSM market was announced and we have followed this through, until we got to September when oil prices shifted above N145, some social issues came up, particularly with trade unions and civil societies leading to an engagement between us and organised labour which prevented the eventual implementation of the actual price of petroleum products at that time.
“Those engagements are continuing and the objectives of those engagements is actually not to prevent deregulation but make sure that there is sufficient framework on ground to ensure that consumers pay for the actual price of this product and they are not exploited.”
The Minister of State for Petroleum Resources, Timipre Sylva, who also spoke at the event, expressed the hope that the Petroleum Industry Bill (PIB) would be passed into law in April.
According to him, frantic efforts are being made by the legislators to complete work on the bill and pass it, in line with the aspirations of critical stakeholders in the petroleum sector.
“The National Assembly has expressed the intent to pass the PIB into law by April 2021, every effort is being made to support the National Assembly to meet this target,” he said.While enumerating the gains of the PIB to Nigerians, the minister said it would create additional infrastructure across petroleum value chain.
He added that it would increase petroleum activities as well as enhance the livelihood of inhabitants of oil producing communities.He said the bill would create additional infrastructure across the petroleum value chain especially from mid-stream and down-stream.
He added that critical infrastructure would also be developed, while utilising the incremental revenue from increased petroleum activities.Sylva said it would also provide additional infrastructure in the host communities arising from the host community trust.
The minister further stated that more businesses would be set up to support increased activities within the petroleum value chain. “Greater confidence would be engendered with certainty in the petroleum industry, which will lead to increased investments.
“Nigeria will occupy its place among comity of nations who have updated their petroleum industry laws in line with current realities.The bill will also enable a structured monetisation of fossil fuel resources before the whole world turns to renewables.”
Nigerians Fault Buhari Over N120bn On Fuel Subsidy
Meanwhile, Nigerians on Thursday took a swipe at the Federal Government over its claims that the country spends N120 billion monthly to subsidise the consumption of fuel in the country.
They said the Buhari government earlier claimed it had removed subsidy from the consumption of fuel and wondered how the government arrived at the bogus figure on subsidy without value addition on the lives of Nigerians.
Former presidential aspirant under the National Conscience Party (NCP), Chief Martin Onovo, implored Nigerians not to trust the current administration with the latest subsidy figure as well as its intent to use $1.5 billion to rehabilitate the nation’s Port Harcourt Refinery.
He told Daily Independent that the solution to the fuel subsidy debacle was for the Federal Government to holistically boost domestic refining, but expressed doubt over the capacity and competence of the incumbent government to drive the initiative in the oil sector.
Muda Yussuf, the Director-General of the Lagos Chamber of Commerce and Industry (LCCI), told Daily Independent that increasing the burden of petroleum subsidy was an offshoot of the deregulation conundrum, which is a major cause for concern.
He said: “There are a number of critical issues that need to be aligned.We have the huge economic cost of petroleum subsidy and the inherent huge fiscal leakages which are clearly unsustainable.There is the social cost of the possible increase in petrol prices and the worry about possible backlash.”
“There is the adverse investment effect on the petroleum downstream sector resulting from policy uncertainty and inconsistencies.Private investors will be reluctant to invest in petroleum refining if the subsidy regime persists.”
“The reality is that the deregulation of the petroleum downstream sector is inevitable if the economy must progress and put an end to the corruption that comes with the subsidy regime, but the policy transition needs to be strategically worked out.
“There could be a social pricing window in the interim where petroleum products could be sold at a subsidised price.
“The NNPC stations could be so designated since they exist in all parts of the country.The government will have to provide a limited budget for this. The other players in the sector should thereafter be allowed to buy and sell according to the dictates of the market.
“We need to free the sector from the current suffocating regulatory framework. The economy has suffered major setbacks as a result of the over regulation of the sector.”
Timothy Olawale, the Director-General of Nigeria Employers’ Consultative Association (NECA), said the huge subsidy borne on consumption of fuel in Nigeria was unsustainable.
He told Daily Independent that there was no economic sense in Nigeria stewing in a budget deficit while it continues to spend hugely on fuel subsidy.To him, the government should freeze fuel subsidy and begin the total deregulation of the downstream sector of the nation’s petroleum industry.