The Federal Government’s decision to extend the implementation of the removal of petrol subsidy by 18 months will adversely affect investments in Nigeria’s downstream sector, the Major Oil Marketers Association of Nigeria (MOMAN) says.
“The decision to postpone by 18 months means the perennial challenges facing Nigeria’s downstream sector will continue. We should not expect any kind of major investments this year,” Olumide Adeosun, chairman, MOMAN, said at a press conference in Lagos, Monday.
“We have failed in terms of collaboration, communication, and engagements with the right people for deregulation to properly happen in Nigeria’s downstream sector,” Adeosun said.
We will continue to consult with relevant stakeholders towards what market philosophy and regulation should be during the 18-month period to ensure uninterrupted supply and transparency, MOMAN noted.
“This will be in line with long-term objectives to the administration and growth of the industry,” he said.
On January 26, the Federal Government proposed an 18-month extension on the period for the implementation of the removal of subsidy on petrol following concerns from stakeholders and the possibility of industrial action.
The Petroleum Industry Act (PIA) passed in July 2021 offered deregulation some hope for the price liberalisation of the downstream petroleum sector. However, the government’s decision to continue its subsidy programme comes as no surprise to analysts following the potential socio-economic effects, especially as the election cycle approaches.
“The reforms contained in the PIA are a combination of several decades of engagement with internal and external stakeholders, capturing local and international best practices to encourage investment, optimise costs, ensure transparency and upgrade industry assets and infrastructure,” the MOMAN chairman said.
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In Africa’s biggest oil-producing country, the programme, known as the Premium Motor Spirit subsidy, artificially keeps everyday petrol prices low for consumers.
The government has previously sought to phase out the programme by July 2022, with the finance minister Zainab Ahmed calling it “unsustainable,” saying the programme costs $7 billion a year in revenue.
According to research by Eurasia Group, Nigeria’s government spent more on subsidising petrol at the pumps between January and August 2021 than it did on its entire health or education budgets in 2020.
In 2021, the finance minister proposed replacing the programme with an initiative to give N5,000 ($12) directly to the poorest Nigerians instead of providing cheaper petrol for all.
Yet, any attempt to end the programme has been met with fierce opposition from labour unions and working-class Nigerians.
Labour unions have also urged the government to expedite work on upgrading Nigeria’s four oil refineries, with the oil-rich country currently dependent on foreign imports of refined petroleum products.
