The minister of finance, budget and national planning, Zainab Ahmed, says the Federal Government has made provision for petrol subsidy for the first six months of 2022.
The Nigerian National Petroleum Corporation (NNPC), which is currently the sole importer of petrol, has been deducting subsidy payments from oil and gas proceeds due for the three tiers of government since there is no provision for it in the 2021 budget.
“In our 2022 budget, we only factored in subsidy for the first half of the year; the second half of the year, we are looking at complete deregulation of the sector, saving foreign exchange and potentially earning more from the oil and gas industry,” Ahmed said at a session at the ongoing NES27 summit.
The price of Brent, the benchmark for Nigeria’s crude oil, has increased by 45 percent this year from an average of $54.77 as of January this year to $85.39 at Tuesday, October 26.
The boomerang effect means Nigeria’s bill for fuel subsidies continues to grow faster at an unprecedented pace, worse enough to threaten the economic health of Africa’s biggest economy.
Read also: World Bank condemns Nigeria’s spending on petrol subsidy
In seven months, petrol subsidy payments gulped N714 billion, shrinking monthly revenue accrued to the federation account. “Complete deregulation of the downstream oil and gas sector will start by July 2022,” Ahmed said.
Also speaking at the session, Doyin Salami, chairman, Economic Advisory Council (EAC), said he had argued for a long time that the subsidy needed to go, saying the Petroleum Industry Act (PIA) made the payment of subsidy of petrol illegal.
“With the PIA essentially it makes illegal petrol subsidy, and yes, there is a period where NNPC and the new regulatory agencies must calibrate themselves, but at the end of this period – and I think it is about six months, which explains why the minister has said for the first half of the year, there is a provision.
“My view is that if we could get it done sooner than that, it would be excellent. It releases money. The key point is simply this: we are now, any which way, at the end of that conversation, except if we choose not to obey the law. My sense is we will obey the law and the subsidy will be gone.”
