The decision of the Federal Government (FG) to extend the implementation of the removal of subsidy on Premium Motor Spirit (PMS) by 18 months will adversely affect investments in Nigeria’s downstream sector, the Major Oil Marketers Association of Nigeria (MOMAN) said.
“The decision to postpone by 18months 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 of MOMAN.
He added, “We have failed in terms of collaboration, communication and engagements with the right people for deregulation to properly happen in Nigeria’s downstream sector.”
MOMAN noted that it will continue to consult with relevant stakeholders towards what market philosophy and regulation should be in place during the 18 month period to ensure uninterrupted supply and transparency.
“This will be in line with long term objectives to the administration and growth of the industry,” Adeosun told BusinessDay.
On January 26, the Federal Government (FG) proposed an 18-month extension on the period for the implementation of the removal of subsidy on Premium Motor Spirit (PMS), following concerns from stakeholders and the possibility of industrial action from the Nigerian Labour Congress (NLC).
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 program comes as no surprise to analysts following the potential socio-economic effects, especially as the election cycle approaches.
Read also: Youth Party faults FG’s decision on subsidy removal suspension
“The reforms contained in the PIA are a combination of several decades of engagement with internal and external stakeholders, capturing local and international best practises to encourage investment, optimise costs, ensure transparency and upgrade industry assets and infrastructure,” Adeosun said.
In Africa’s biggest oil producing country, the program, known as the Premium Motor Spirit subsidy, artificially keeps everyday petrol prices low for Nigerian consumers.
The government has previously sought to phase out the program by this summer, with Finance Minister Zainab Ahmed calling it “unsustainable.” She said the program cost $7 billion a year in revenue.
According to research by Eurasia Group, Nigeria’s government spent more on subsidising fuel at the pumps between January and August 2021 than it did on its entire health or education budgets in 2020.
In 2021, Ahmed proposed replacing the program with an initiative to give N 5,000 ($12) directly to the poorest Nigerian families instead of providing cheaper fuel for all.
Yet any attempt to end the program has been met with fierce opposition from labor unions and working-class Nigerians. Protests against the potential phase out of the program were expected on Thursday.
Unions have also urged the government to expedite work on upgrading Nigeria’s four major oil refineries, with the oil-rich country currently dependent on foreign imports of refined petroleum products.
