• Thursday, April 25, 2024
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After burning N7.3trillion on petrol subsidy, Buhari admits its futility

Nigeria’s subsidy payment in 8 years

“If anybody says he’s subsidising anything, it is a fraud”, this was a statement by Muhammadu Buhari in a 2011 interview while he was trying to convince Nigerians he was worthy of their votes.

Seven years on the saddle as Nigeria’s President, the same man who claimed petrol subsidy was a fraud has burnt N7.3trillion of the country’s scarce money funding a fraud.

This is more than any other president since 1999. Between 2010 and 2015, former President Goodluck Jonathan, the patsy for APC’s attacks about misgovernance, only spent N4.3trillion on subsidy according to figures from the Nigeria Extractive Industries Transparency Initiative (NEITI).

Nigeria's petrol subsidy payment in eight years

Nigeria’s petrol consumption under Jonathan hovered between 30 -35 million litres daily but under Buhari, as president and Petroleum minister, consumption is anyone’s guess. You start out at 55million litres daily and work your way up to 93 million and even then, confusion awaits you.

The NNPC Retail Ltd, the downstream subsidiary of the NNPC reported an increase in inventory turnover from N6.5 billion to a whooping N28.9 billion. With so much inventory, Nigerians constantly live in dread of product scarcity.

To illustrate the depth of carnage to Nigeria’s coffers, consider that in 2021, Buhari’s government spent N1.77 trillion on petrol subsidy, a 477 percent increase from N307 billion in 2015, whereas in 2022 the government is projected by analysts at PwC Nigeria to spend 24 percent (N4 trillion) of its total projected expenditure (16.6 trillion) on fuel subsidy leaving a measly 29.84 percent (N4.95 trillion) for capital projects.

The NNPC Ltd in its August financial and operations report refutes this analysis and claims it would spend about N3.1 trillion in 2022. This would have been hilarious if it weren’t so dangerous.

Read also: Buhari admits that petrol subsidy is unsustainable

On his watch, Nigeria has become the country with the highest number of extremely poor people in the world, outranking countries with three times its population. Car ownership has fallen yet petrol consumption has ballooned according to NNPC figures.

Power supply has experienced a modicum of improvement especially in major cities, while population has grown since 2015, there is no justification for the amount of petrol that the country is supposedly consuming.

Meanwhile, Nigeria’s neighbouring countries are gradually seeing no use to keep importing petrol as smuggled petrol from the country overwhelms their market.

Leaving a mess

“Petrol subsidy has been a recurring and controversial public policy issue in our country since the early eighties. However, its current fiscal impact has clearly shown that the policy is unsustainable,” Buhari said in his 2023 budget presentation on Friday.

In July this year, the federal government projected that the petrol subsidy will gulp N6.7 trillion in 2023 if bold steps are not taken to do away with it, even as the debt service outpaced its revenue in the first four months of this year.

In August, Zainab Ahmed, minister of finance, budget and national planning said the federal government of Nigeria spends N18.397 billion on petrol subsidies daily. The government spends N238 per litre of petrol or N18.397 billion daily as a subsidy.

While subsidies has risen, oil production has fallen to the worst levels in history. When he became president, crude oil production was nearing 2 million barrels per day. Today, the country is struggling to raise production to 1 million barrels per day.

Nigeria's oil production in 2022

While production has fallen, IOCs are fleeing onshore and shallow water fields

“The sharp increase in these divestment activities is primarily due to challenging business environments that have impacted profitability, reduced confidence in a segment of the Nigerian oil and gas market segment, and hostility within host communities,” said Ese Osawmonyi senior analyst at SBM Intelligence, a Lagos-based risk analysis firm.

Buhari’s successor will struggle to tamp down public outrage if the subsidy is finally removed in June 2023. When oil prices crashed below $30 per barrel in 2016, he rejected counsel to remove subsidies. If oil continues to hover around $100 per barrel next year, huge outrage similar to angst in 2012 will likely greet an announcement of subsidy removal by a new government. Labour leaders will threaten to cripple the economy.

Headline inflation has risen to 20.5 percent, the highest in 17 years and could worsen with the removal of subsidy. Unemployment is over 33.3 percent, underemployment is up to 22.38 percent, while labour productivity growth rate has collapsed to 1.7 percent in 2021 from 16.9 percent in 2012.

These have helped to compound Nigeria’s poverty position with 95.1 million Nigerians or 42.6 percent of the population living in poverty. This situation will leave a new government on an unsure footing.

At home, the size of Nigeria’s public debt has risen from less than N10 trillion in 2012 to a staggering N44 trillion in 2022, and this does not include the near N20 trillion ways and means of borrowing. The public debt level is now above 24 percent of GDP.

Buhari touted infrastructure spending as his legacy in the budget speech but analysts say spending on infrastructure is weak, unco-ordinated and value delivery has been so poor that there is absolutely no chance the infrastructure the government says it is building will deliver the growth to pay the astronomical cost funded by borrowing.