• Saturday, May 25, 2024
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Fuel subsidies gulp over N4.9trn in 7 years


In the last seven years, Nigeria may have spent more than this year’s budget of N4.987 trillion on fuel subsidies, BusinessDay’s analysis of figures on fuel subsidies from 2006 to 2012, has shown.

In 2006, subsidy cost on petrol was N151.9 billion (bn), N188 bn in 2007, N256.3 bn in 2008 (from January to July); in 2009, N421.5 bn was spent, N673 bn in 2010, and N1.3 trillion spent in 2011 was revised up to 2.19 by the Ministry of Finance, after arrears were paid in 2012 for PMS consumption in 2011.

In 2012, the sum of N888bn was allocated for subsidy payments in the budget for petroleum product importers, but in December a supplementary budget of N161.6bn for payment of arrears of fuel subsidy was submitted by the president and later approved by the National Assembly. For 2013, the government has already earmarked N971bn for petroleum subsidy in this year’s budget.

An analysis of the 2013 budget shows that allocation for fuel subsidy constitutes about 20 percent of the entire budget. It is ten times more than the appropriated sum for agriculture and rural development (N81.41bn), three times the amount set aside for health (N279.23 bn), and twice the amount appropriated for education (N426.53 bn).

The amount appropriated for capital expenditure N1.54 trillion is just a little above the amount set aside for fuel subsidy.

According to analysts, the continued provisions for fuel subsidy have yet to translate to sustained economic growth for the nation, as its management has been fraught with corruption and inefficiencies. They further add that the purpose for which the subsidies were put in place, such as making energy more affordable and to distribute the wealth from the country’s fuel resources, was not being achieved.

According to a recent research from NOI Polls, many Nigerians purchase fuel at prices way above the official pump price of N97 stipulated after the partial removal of fuel subsidy by government last year.

But despite the foregoing fact, there is still stiff opposition to complete removal of the subsidy. Fifty-nine percent of the people surveyed are not in support of the government’s decision to remove fuel subsidy.

Philip Asiodu, former chief economic adviser, had observed that subsidy removal, total deregulation, incentives for investment in refineries, more rational and efficient use of products, would have been achieved 20 years ago, but for the abrupt stoppage of the programme by the then military head of state.

“It is not difficult to show with clearly set out data, how wasteful, unproductive and distorting is the present policy on pricing of motor spirit and the management of petroleum subsidy. The present price regime which encourages wholesale trafficking along Nigeria’s borders and even fraudulent diversion of product tankers, probably results in our subsidising without acknowledgement, products consumed by our neighbours of up to 100,000 barrels a day or 25 percent of our total imports,” he said at the annual conference of the National Association of Energy Economics.

According to the Nigerian Natural Resource Charter (NNRC), in a recent briefing note on fuel subsidy, Nigeria can secure the social and economic benefit of the current and future generations of its citizens, by using revenues generated from its subsoil resources to enable and maintain investments outside the resource sector in sectors which would benefit the general populace e.g. infrastructure, health, education and agriculture.