President Muhammadu Buhari has advanced reasons why the removal of petroleum subsidy cannot be carried out under the current economic circumstances.
The Nigerian leader, while responding to questions posed by Bloomberg News, on Tuesday alluded to the fact that most “western countries are today implementing fuel subsidies”, adding that “Why would we remove ours now? What is good for the goose is good for the gander”
He added that current realities show that removal of fuel subsidy is becoming untenable
Subsidy or under-recovery is the underpriced sales of premium motor spirit (PMS), better known as petrol, for which government has continued to spend a huge amount of its resources
According to the President , “ What our western allies are learning the hard way is what looks good on paper and the human consequences are two different things”
Buhari who stated that his government had set in motion plans to remove the subsidy late last year, added that “ after further consultation with stakeholders, and as events unfolded this year, such a move became increasingly untenable”
Recall that the National Assembly had earlier this year, approved the request of the President to earmark N4 trillion for petrol subsidy in 2022.
Nigeria’s petrol subsidy payments has over the years, grown by about 349.42 per cent from N350 billion in 2019 to N1.573 trillion in 2021, propelled by the rising price of crude oil in the international market and the falling value of the Naira.
In 2020, the cost of subsidizing the product was put at N450 billion.
In 2022 alone, the total cost of subsidy between January and February was put at N396.72 billion, for the first two months of the year, according to a data from the Nigerian National Petroleum Corporation, NNPC.
Between 2006 and 2019, the federal government spent a total of N10.413 trillion on fuel subsidies
The situation is compounded by the fact that none of Nigeria’s three government-owned refineries is currently operational, despite huge investments in their Turn Around Maintenance (TAM) by the government.
But the President added that the solution lies in “ boosting internal production for refined products, and assured that “ Capacity is due to step up markedly later this year and next, as private players and modular refineries (Dangote Refinery, BUA Group Refinery, Waltersmith Refinery) come on board.”
President Buhari while also speaking on Nigeria’s slumping oil production and the country’s inability to meet its OPEC quota for almost a year despite elevated prices, blamed “criminalities and terrorism” for hampering production
Read also: Fuel market crisis deepens as subsidy swells
This is just as he disclosed that “on 1st July the NNPC will become a Limited Liability Company and be subject to more robust auditing and commercial disclosure obligations”
This, he said will help stimulate investment and boost transparency, where corruption has deterred the former and stymied the latter.
“My administration is the first to pass this landmark reform in our oil and gas sector, after two decades of predecessors’ failure to do so – no doubt due to vested interests.
“Criminality and terrorism in oil-producing regions hamper production, and it would help if our western allies designated IPOB as a terrorist group, given their complicity in damage to pipelines and infrastructure.
“Four years ago, we unveiled plans for a new gas pipeline connecting Nigeria to Europe. Last week (2nd June) – in record time – the Nigerian National Petroleum Company (NNPC) entered into an agreement with the Economic Community of West African States (ECOWAS) for its construction.
“We have invested in our security forces, including the $1 billion military deal with the U.S. for the acquisition of A-29 Super Tucano aircraft. These efforts are making an impact: wells that had to be closed due to criminality have now re-opened. With these efforts, OPEC has raised our quota for next month.
On gas supply to Europe, the President said Nigeria need long term partnership not inconsistency and contradiction on green energy policy from the UK and European Union.
“Investment is hampered by their broad-brush moratorium on overseas gas projects, while at home the same projects are classified as green. It does not help their energy security, it does not help Nigeria’s economy, and it does not help the environment. It is a hypocrisy that must end.
“To change, the UK and EU countries should invest in our planned 4000 km pipeline to bring Nigerian gas – the largest reserves in Africa – via Morocco, then onto Europe.
Also speaking on the exchange rate, President Buhari revealed that the “ exchange rate is still susceptible to external shocks that can suddenly and severely affect Nigerian citizens”
“As we step up domestic production – both in fuel (enabled by Petroleum Industry Act (PIA) and food (agricultural policies) – the inflationary threat shall diminish, and we can move toward unification”
Speaking on the current security challenges, the President revealed that the Boko Haram group have become extinct as a military force.
“The leader of ISWAP was eliminated by a Nigerian Airforce airstrike in March. The jets acquired from the US and intelligence shared by British were not provided to previous administrations and stand as testament to renewed trust re-built between Nigeria and our traditional western allies under my government.
He stated that his administration is the only in Nigeria’s history to implement a solution to decades-long herder-farmer conflicts, exacerbated by desertification and demographic growth.
President Buhari appealed to Nigeria’s Western allies to “designate IPOB as terror group”, as part of measures to check insecurity in Nigeria
“We urge those same international partners to take additional steps costing them nothing, by proscribing another group – IPOB – as a terrorist organization. Their leadership enjoys safe haven in the West, broadcasting hate speech into Nigeria from London, spending millions lobbying members of the US Congress, and freely using international financial networks to arm agitators on the ground. This must stop.
He disclosed that the Nigerian power sector we need for more input, even as he blamed slow legislative framework for some of the challenges being encountered
“Once signed into law the constitutional amendment bill – recently voted through parliament – will allow state governments to generate and transmit their own electricity, further facilitating investor participation in our market and enabling states and local businesses to transmit excess supply to the grid.
He noted that the landmark PIA will bolster input, raise capital, and bring transparency to the system.
“On grid modernization, there are hundreds of ongoing projects and initiatives attracting funding from investors. Take my Presidential Power Initiative (PPI), a government-to-government initiative between the Governments of Nigeria and Germany, with Siemens AG, to upgrade the electricity grid with a $2 billion investment.
He stated that the government is also decentralizing the national grid through renewable driven mini-grids.
“The $550 million Nigeria Electrification Project has deployed more than 20,000 Standalone Solar Systems (SHS), as well as Solar Hybrid mini-grids in over 250 locations”
On the government borrowing plans, President Buhari dismissed what he calls “ narrow focus on debt” which he says “misses the point”.
“What it fills is Nigeria’s longstanding infrastructure deficit by constructing a foundation for sustainable growth – spreading opportunity to ensure no part of the country is left behind, which has led to insecurity in the past.
“Our infrastructure developments have been the most ambitious since Nigeria’s independence. Over 800 federal roads are being constructed or undergoing rehabilitation and 650km of rail line have been laid, helping alleviate food inflation pressures, given most food is produced in the north.
“Had the infrastructure gap not been filled it will only grow, become more costly to repair what little we have while lacking more on infrastructure on which to build growth, negatively impacting progress towards UN Sustainable Development Goals.
Speaking on the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, the President noted that while CBN governor is appointed by the President, the appointment is subject to confirmation by the Nigerian Senate.
“Ultimately, it will be for the CBN’s board of directors to determine whether a CBN governor’s actions have fallen foul of the laws in place to ensure he can most effectively carry out his duties.
“But there is a subtext to the accusations. Because the governor follows a model outside of the economic orthodoxy, he is labelled political. But the orthodoxy has proved wrong time and again.
“Instead, the governor is following an alternative economic model that puts people at the heart of policy. Nigeria should be free to choose its development model and how to construct our economy, so it functions for Nigerians.” he said.
