The Nigerian government, in 2022 fiscal year spent over N4 trillion on fuel subsidy, this is as total import of the premium motor spirit (PMS) stood at 23.5 billion litres in the period.
According to Farouk Ahmed, chief executive officer, Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) who disclosed this in Abuja at the ongoing Energy Labour Summit organised by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), average daily truck out over 8 years stood at over 55 million litres per day, with a peak of 66.7 million litres recorded for the year 2022.
According to him, Nigeria is greatly endowed with abundant reserves of over 37 billion barrels of crude oil and over 206 TCF of gas.
Representing the CEO, Bashir Sadiq, executive director of corporate services and administration of the agency, said, “The country needs a very robust mid and downstream sector to maximise the inherent values that can be derived from these resources.
“The mid and downstream sector is where the most value derivable from the nation’s hydrocarbon resources can be obtained through the creation of employment, accelerated industrialization of Nigeria, security of energy and generation of revenue to list just a few.”
He stressed on the need for a transparent mid and downstream sector, as a critical tool to attract investments, promotes efficiency, competition and sustainable development of the sector.
For him, the Petroleum Industry Act (PIA) 2021, which is the governing legislative instrument that defines the key regulatory frameworks of the mid and downstream industry has made substantial provisions that will guarantee optimal transparency in the operations of the sector.
Read also: As subsidy goes, Nigerians demand cut in governance costs
“This is necessary to encourage and promote sustainable investment across the value chain and guarantee predictability for mid and long term business planning and ease of doing business.
“To entrench the above, on 16th August 2021, the long-awaited Petroleum Industry Bill was signed into law and it became the “Petroleum Industry Act 2021.
“This important milestone ushered in a new dawn in the history of the growth and prosperity of the Nigerian oil and gas industry through key industry reforms which include the removal of fuel subsidy and migration to a full market-based pricing for petroleum products which is the only way to attain a transparent mid and downstream value chain for petroleum products supply,” he said.
He explained that the escalating burden of the subsidy removal was largely driven by upward trajectory in global crude oil and products prices, freight rate and other associated cost on one hand and the year-on-year increase in average daily evacuation from depots on the other hand.
For him, the operation of subsidy regime in Nigeria also impacted the pace of development of the midstream sector by limiting refinery design/construction to only products that have been fully deregulated.
He explained that the immense midstream and downstream investment opportunity that Nigeria holds can only be optimised in a fully operationalized market-based pricing environment for all petroleum products.
“The financial implication of PMS subsidy rose to over N400 billion monthly which translates to over N4.8 trillion (US$6bn) annually making it unsustainable in the short to medium term.
Read also: U-turn: PENGASSAN confirms government still pays fuel subsidy
“Subsidy on PMS hugely impacted Government revenues available to all tiers of government leading to inability of the government to meet their obligations,” he said
Speaking further, Ahmed said that the subsidy removal policy by the Tinubu-led administration, will facilitate the development of healthy competitive markets and operational efficiency that will promote transparency, private sector investment in the downstream value chain of the Nigeria’s oil and gas sector.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
