Just few days ago, as the 8th National Assembly were winding down, the senate approved the sum of N129 billion ($422 million) payment to cover debts to local oil firms related to a fuel subsidy programme. They listed 67 companies that will get a portion of the payment. The government has struggled for years to make timely subsidy payments to fuel importers.
Has Nigeria reached the point where the downside of huge petroleum subsidy payments by the government outweigh the benefit? Most certainly.
Emmanuel Ibe Kachikwu, immediate past minister of state for petroleum resource, had said there was never been any doubt about the logic of trying to remove fuel subsidy but that the reality is that Nigeria has a very unique situation.
“There is a lot of anti-populism against the decision, so any president that is going to take that decision must weigh all the factors”, Kachikwu told journalists on the sideline of the second annual international conference by the Oil and Gas Trainers Association of Nigeria (OGTAN) in Lagos weeks before the federal executive council cabinet was disbanded.
Zainab Ahmed, immediate past finance minister, also said the Nigerian government has no plan to remove fuel subsidy.
“The IMF would say fuel subsidies are better removed so that you can use the resources for other important sectors, which is good advice, but in Nigeria, we do not have any plans to remove fuel subsidies at this time, because we have not yet designed buffers that will enable us to remove the subsidy and provide cushions for our people”, Ahmed said during a ministerial press briefing at the 2019 International Monetary Fund and World Bank Spring Meetings in Washington DC.
The Nigerian National Petroleum Corporation (NNPC), as the sole importer of petrol into the country after private oil marketers withdrew from the importation of the product, has been bearing the burden of subsidising the product.
According to the Petroleum Products Pricing Regulatory Agency (PPPRA), Nigeria’s daily petrol consumption has increased by two million litres, from 54 million litres in 2018 to 56 million litres in 2019. Between 2017 and 2019, the country’s daily petrol consumption rose by 10 million litres. With the landing cost of petrol N35 higher than the pump price of N145 per litre, keeping up with the subsidy payments, thus, becomes huge albatross of any government.
The subsidies continue to be contentious in Africa’s top crude oil producer, which imports most of its gasoline due to underperforming refineries.
While waiting for Dangote’s 650,000 barrels per day capacity refinery to come on stream, getting government’s refineries to ramp up capacity looks like a mirage. The NNPC financial records show that the corporation recorded losses in the region of N551.46b from January 2015 to December 2018, with most of the losses coming from the refineries. The refineries made a total loss of N132.5b in 2018 alone. That is a 39 per cent increase from the N95.09b losses it incurred in 2017.
While weaning Nigeria from petroleum subsidy is not an overnight task, President Buhari should set a target and make deliberate effort to bite the bullet. Putting in place buffers for the citizens should not wait for another budget cycle and if the state-oil company fails to get the refineries working, it is time to let go of them.
FRANK UZUEGBUNAM
