• Sunday, June 23, 2024
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BusinessDay

NEITI offers recommendations to manage subsidy removal

Kwara residents seek government’s intervention on economic hardship

The Nigeria Extractive Industries Transparency Initiative (NEITI) has recommended steps with which subsidy removal can be properly managed while mitigating potential adverse impacts.

The agency also revealed that it is set to commission a special research on the actual consumption of PMS in Nigeria to establish precisely what the nation is consuming.

This was revealed in a statement signed by Obiageli Onuorah, head communications & stakeholders management, NEITI made available to BusinessDay which also lauded president Bola Tinubu’s efforts to block leakages, grow revenues and advance the ongoing reforms in the oil, gas and mining industries through this directive.

“NEITI’s view remains that the data on the country’s actual consumption is unknown resulting in huge revenue losses to the nation through subsidy payments based on estimates,” it stated.

First, NEITI urged that implementation of the Petroleum Industry Act (PIA) be strengthened as a whole and not in parts, adding that the government should commission a special report on actual PMS consumption in Nigeria.

NEITI also underlines the importance of unveiling the implementation of people-oriented welfare programs to provide relief for the poor and vulnerable; priority attention should be paid to the rehabilitation of the nation’s four refineries currently ongoing while encouraging private investments in establishing new refineries,” it said.

Read also: Multi-billion dollar export market, local demand, make Nigerian grains promising

The agency advised that stringent sanctions are enforced for criminal activities in the oil and gas sector while stakeholders’ consultations, engagements and enlightenment are properly conducted.

NEITI recalled that it had clamoured for the removal since 2006 given its concerns about the huge financial burden that the subsidy regime imposed on the growth of the Nigerian economy over the years as it was being funded by the federal government and external borrowing with negative consequences on government overall revenue profiles.

“NEITI was also concerned that the consequences of funding subsidies have resulted in poor development of the downstream sector, declining GDP growth, rise in product theft, pipeline vandalism, environmental pollution and undue pressure on foreign exchange; Other challenges imposed on the economy were naira depreciation, low employment generation, the declining balance of payments and worsening national debt,” it added.

Making reference to its report, it stated that between 2005 to 2021, the country spent $74.3862 Billion which translates to 13.697 trillion in Naira; a breakdown of these figures showed that in 2005, the government paid $2.6 Billion as subsidy, In 2006 & 2007, it paid $1.99 Billion & $2.176 Billion respectively.

It added that subsidy payments more than doubled in 2008 and 2010 and witnessed the highest increase ever in 2011 to $13.52 Billion however a sharp decline was witnessed in 2012, 2013, 2014 and 2015 when it dropped to as low as $473 Million in 2017.

“The reduction was short-lived as the payments skyrocketed to over $3.88 Billion in 2018 and 2021 to $3.575 Billion, by these figures, Nigeria expended an average of 805.7 Billion Naira annually, 67.1 Billion monthly or N2.2 Billion daily,” it stated.

The NEITI data added that the amount expended on subsidies from 2005 to 2021 is equivalent to the entire budget for health, education, agriculture and defence in the last 5 years and also equals the capital expenditure for 10 years between 2011-2020.

The agency urged regulatory institutions to stand firm and tackle artificial scarcity, hoarding and other man-made obstacles being created at the moment to frustrate the implementation of subsidy removal.

“With its removal, subsidy payments for petroleum products with its attendant insecurity in the country, due to smuggling etc will be reduced,” it added.