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Each month, more than N120 billion is pumped into an unsustainable subsidy regime amidst dwindling revenues facing Africa’s most populous nation. The Nigerian government printed N60 billion to augment March allocation to states – reflecting the precarious finances of the country.
The Nigerian National Petroleum Corporation (NNPC)’s Group Managing Director Mele Kyari had, in the first quarter of 2020, declared a ‘no subsidy’ payment regime in the petroleum downstream sector. However, the corporation has continued to pay for subsidies, despising the country’s precarious economic situation.
Eating the future
In Africa’s largest economy with highest number of poor people in the world, N120 billion would pay the minimum wages of N30,000 for at least four million citizens. It could build up to 2,400 houses for thousands of homeless Nigerians. But absence of these in a subsidy regime has meant more socio-economic unrests in the country.
Energy experts are unhappy that Nigeria’s dwindling revenue is further plundered by an opaque subsidy regime.
“We may be eating up the future with the way we are going. For some us ,we cannot say this enough. This is not the way to go. Most often, I wonder what the Nigerian Labour Congress wants to achieve in the way and manner they tread with the government on the subsidy issue. We cannot keep making economic decision political all the time You can see the way we’re struggling to pull this through.” the Chairman of Major Oil Marketers Association of Nigeria Adetunji Oyebanji told the ICIR.
Global rise in oil price at slightly above $60 per barrel could have ushered Nigeria into a golden era. It should ordinarily have increased foreign exchange inflows into the country in dire need of it. However, the Federal Government has pledged to continue with the subsidy regime in the next six months, amounting to N720 billion, putting the country’s fiscal status in further peril.
“What we are gaining from the rising oil price, we are loosing through unsustainable subsidy payment,” an oil sector governance expert Henry Ademola Adigun told the ICIR.
The number of PMS trucks shipped per day is estimated at 80.23million litres, as confirmed by the Petroleum Product Pricing Regulatory Agency (PPPRA), spiralling the subsidy cost. Energy experts allege that some of Nigeria’s petroleum products find their way to neighbouring West African countries which benefit largely from a corrupt subsidy regime.
Analysts put the blame on the doorstep of the NNPC, which is the sole PMS importer, wondering why it cannot superintend the industry as expected.
“NNPC cannot play the role of an importer and a regulator at the same time. This is why we are seriously advocating for the passage of the Petroleum Industry Bill. It may not be a perfect document, but it would definitely deal with a lot of issues that have been impeding the growth of the petroleum sector.” Adigun stated.
Experts say for Nigeria to address concerns of sole importation by the NNPC, there is a need to have a market driven exchange rate, since the government has been the sole importer of PMS and most of its detailed import statistics shrouded in secrecy.
“We have raised this concern severally about multiple exchange rate. It is hurting the economy seriously. A market-driven exchange rate would have attracted more marketers into importation and also give easier access to dollar for the manufacturers to drive businesses and improve investment climate for the country. ” Director-General of the Lagos Chamber of Commerce Muda Yusuf told the ICIR.
Energy analysts say the federal government must be able to pass the Petroleum Industry Bill to have a fiscal framework that would drive investment into the Nigeria’s petroleum sector.
They say Nigerian government is loosing investments to smaller African countries for lack of proper fiscal framework in driving the sector.
“Smaller countries like Mozambique are attracting massive investment in the gas sector. We cannot keep delaying the passage of this bill forever. We’ve been on this for a long time now. The oil is the mainstay of our economy and we’re hurting ourselves if we keep delaying the passage of this all important bill.” Professor of Energy Economics at the University of Ibadan Adeola Adenikinju told the ICIR.