NIGERIA’S Central Bank Governor, Godwin Emefiele, says the Federal Government will put a stop to petroleum subsidy once local consumption demand is met, with the 650,000 barrels per day Dangote refinery expected to fill the gaps when it becomes operational.
The World Bank had at the ongoing 2022 Springs Meetings of the International Monetary Fund, (IMF) told the Nigerian authorities to stop petrol subsidy payments, stressing that it deprives the country of funds for developmental projects.
According to the Washington-based lender, Nigeria’s overburdening subsidy and multiple exchange rates complicate its economy and distort investment inflows.
Emefiele, who is participating at the ongoing meeting in Washington DC, USA, responded that the Nigerian government was not oblivious of the cost-burden posed by subsidy but wanted to satisfy local consumption before subsidy removal.
He said, “When you see people talk about removal of subsidy, I support it. When people talk about holding on to it till we get the right time, I support it also. You heard the Finance Minister say we decided to defer the policy on subsidy removal till sometime next year when we’re sure Dangote refinery has fully taken off.
“What does that mean? It means it is easier for people to find the petroleum product and pay in naira, rather than the importation troubles we are going through. You’ll find that the price would be a little bit high and Dangote himself would procure the crude, out of 445,000 barrels per day.”
The apex bank governor said meeting local refining demands would prune transportation logistics costs and other related charges associated with fuel import.
Nigeria imports virtually all its petroleum products because of the below par performance of its functional refineries.
According to The ICIR analysis, the Port Harcourt refinery did not record any revenue in 2019, yet it reported N25.19 billion in expenses. Six directors collected N59.65 million in fees, including the Group Managing Director of the Nigerian National Petroleum Company, Malam Mele Kyari.
Total salaries and pays received by the 675 staff of the Port Harcourt refinery between 2017 and 2019 were estimated at N80.57bn, but revenues received by the company within the period were estimated at only N6.27bn, implying that the NNPC sought N74.3bn from outside the refinery to pay staff salaries.
Similarly, the Warri refinery generated a revenue of N4.429bn between 2017 and 2019, but incurred a N178.315bn cumulative loss within the period.
Similarly, the Kaduna refinery made a revenue of N2.278bn but incurred a loss of N241.527bn in the same period, exposing the ineptitude of the Federal Government and the NNPC in managing public oil sector assets.
To worsen the concerns, several analysts, including government officials, are worried about the ‘opaque’ daily petrol consumption figures, which has seen rising subsidy payments.
The NNPC pays an average of N120bn monthly on petrol subsidy.
This amount has spiralled over time since NNPC became the sole importer of the products, a situation that has forced President Muhammadu Buhari – the substantive Minister of Petroleum – to direct the pruning of the rising subsidy payment figures by the NNPC.
Last month, President Buhari submitted a supplementary budget of N4 trillion, which has been approved by the National Assembly, to take care of fuel subsidy costs in 2022.
A former CBN governor, Sanusi Lamido Sanusi, said that Nigeria benefited nothing from the oil price rise in the global oil market as it would be using the gains of the rise in the market to pay for the subsidy, describing it as an impediment to developmental projects.
“Oil price goes up, oil-producing countries are happy. However, in Nigeria, oil price goes up, it doesn’t favour the Nigerian economy because of subsidy payment,” Sanusi said in an October report by THE ICIR.
He added, “We have this scheme called subsidy, which is a scam, hence everything that practically comes in goes back out to import of petroleum products and to pay subsidy because our refineries are not working, and we rely on imports hugely.”
Nigeria’s Minister of State for Petroleum Resources, Timipre Sylva, said there was the need to interrogate the spiralling subsidy figures.
“And sometimes, the figures you hear are crazy. I mean, when they tell you 90 million litres a day, I mean, they’re crazy figures. So I mean, so for me, what is the total of all this? We’ve been interrogating these numbers for 20 years.
“We continue to interrogate these figures because we all know that there is a problem here; it’s opaque,” Sylva said.
Meanwhile, Nigeria’s Minister of Finance, Zainab Ahmed, who also spoke at the meeting in Washington DC, said the government was worried about the high rate of inflation driven by high cost of food.
Ahmed, however, assured that reforms were ongoing to address the concern with CBN’s lending support to farmers.
“The monetary and fiscal authorities are working to see how we can provide support and be able to reduce high inflation rates and impact our people,” she said.
On how the government manages its debt concerns, the minister said the Finance ministry and other related agencies were working hard to increase the country’s revenue.
This, she said, would enable it meet debt service obligations and other developmental needs.