AGAINST common sense and market dynamics, the Nigerian government is set to continue with unsustainable payment of N120 bilion fuel subsidy for the month of June despite calls by the Nigerian Governors’ Forum for full deregulation of the petroleum downstream sector.
The continuation of the subsidy would not only reduce federal allocations to states, but it would also perpetuate an opaque system that robs Nigeria’s poor.
Minister of State for Petroleum Resources Timipre Sylva said in a statement on Friday that the government was not in a hurry to increase the price of the premium motor spirit (PMS) to reflect the current market realities despite the huge burden of ‘under recovery’ on the economy.
President Muhammadu Buhari’s administration has baptised the term ‘subsidy’ to ‘under recovery’ and has been sustaining the payment despite Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) Mele Kyari emphasising that there would be ‘no more subsidy’ payment in the downstream sector.
“The current price of petrol will be retained in the month of June until the ongoing engagement with the organised labour is concluded,” Sylva said in a statement issued on Friday.
The minister noted that the clarification became necessary in the light of the recent reports regarding the resolution of the Nigerian Governors’ Forum to increase the price of petrol.
He called on the petroleum product marketers not to engage in any activity that could jeopardise the seamless supply and distribution system in place while urging the members of the public to avoid panic buying with an assurance that the NNPC had enough petroleum products to keep the nation wet.
Recall that the Nigerian governors, arising from a virtual meeting on Thursday, had advocated full deregulation of the petroleum downstream sector, a move that would put to stop to the payment of N120 billion fuel monthly subsidy payment in the country.
Governor Nasir-El Rufai, at the meeting, disclosed that the payment of between N70billion and N210 billion monthly fuel subsidy was unsustainable.
He made the observation while presenting the report on appropriate pricing of PMS during the 30th teleconference meeting of the NGF chaired by Governor Kayode Fayemi.
The ICIR had earlier reported that Fayemi had also raised concern about the sustainability of the overburdening petrol subsidy, stressing that the government’s pro-poor policies would be adversely affected if the government continued with subsidy payment on PMS.
Analysts believe that continuing with PMS subsidy in June is postponing the evil day.
An oil sector governance expert Henry Ademola Adigun told The ICIR that the government was in a serious dilemma of managing a possible outburst of protests and dwindling revenues for states.
“There won’t be subsidy removal till August. Labour’s condition is that you must fix the refineries before subsidy removal. Fixing the refineries could take up to two and a half years. So, the government seems to be marking time and waiting for possible adjustment and growth in the economy to manage the situation,” Adigun said.
He stressed that states’ share from proceeds of crude oil sales in the federation account would keep dwindling if the government kept on with the subsidy payment. He noted that the government had kept shifting the goal post for an unsustainable venture benefitting only the Nigerian elite.
“In the long run. This is a step that the government must find a way and sort out so that we grow our economy and create more opportunities for the people.”
A member of the Presidential Economic Advisory Committee Bismarck Rewane, on his part, faulted the NNPC on the 200 per cent increase in fuel consumption in the country.
Rewane, who described subsidy as ‘reverse taxes’ in a monitored television Arise TV broadcast on Thursday, expressed concern that the spiralling PMS figure did not reflect the current economic reality across the country, stressing that the payment was about N30 million when the economy experienced boom during the previous administration.
“Subsidies are reverse taxes and they distort the allocation of resources. It is said and is believed that we consume daily 93 million litres of fuel. I don’t know where that figure is coming from. For instance, about five to six years ago when the economy was booming and the number of registered vehicles was almost 200 000, then our consumption was nearly 30 million litres.”
He, however, expressed concern that now that the economy was in a decline, consumption was on the increase.
“How could our consumption of petrol go up by 200 per cent?” he asked.
“What it does mean is that petrol is being smuggled out of the country and people are making money at the country’s expense,” he further argued.