A Review of the Nigerian Energy Industry

Why subsidy should be removed – NACCIMA, LCCI, others

23 June 2015, Abuja – The organised private sector has thrown its weight behind the call on the Federal Government to remove fuel subsidy.

fuel pumpNational Vice President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, NACCIMA, Mr. Billy Harry, Monday, supported the scrapping of subsidy on petroleum products, saying subsidy has failed to benefit ordinary Nigerians over the years.

Also, the Director General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf in a statement said: “The biggest hole in the finances of government in the country today is related to subsidy payments. There are two components of this. The first is the actual subsidy, which is the differential between the pump price and the landing and other costs of fuel. The second (and more disturbing component) is the corruption inherent in the fuel subsidy regime.

“For several years, the economy suffered severe bleeding from this phenomenon. Although it is not clear whether there has been any policy pronouncement on whether or not to retain the subsidy regime, the truth is that it is not sustainable. It is in the overall interest of the economy and citizens for it to be discontinued.”

Speaking in the same vein, Dr Godwin Ichimi, a Research Fellow at the Nigerian Institute of International Affairs, NIIA, disclosed that fuel subsidy is not economically sustainable, especially with the activities of a “callous cartel.”

According to him, in the analysis of fuel subsidy removal, the question that should be asked is: how will the removal impact the average Nigerian and what will be the benefit to Nigerians?

But the Nigeria Labour Congress and Trade Union Congress, however, warned President Muhammadu Buhari that their members will resist any attempt to remove fuel subsidy.

The leaderships of the Trade Union Congress, TUC, and the Nigeria Labour Congress, NLC, told Vanguard, yesterday, that any attempt by the President Buhari-led government to remove subsidy will lead to a serious unrest in the country.

Complete deregulation of oil and gas sector

Stating the position of the private sector, Mudal said: “The budget provision for PMS subsidy in 2014 was N971.14 billion while the figure for kerosene subsidy was not disclosed. In the 2015 draft budget from the executive, the provision for PMS subsidy was N200 billion while that of kerosene was N91.03 billion. Evidently, the numbers would be much more than this even before the first half of the year.

“One of the critical elements of the oil and gas sector reform, particularly the downstream sector,” according to Mudal, “is the complete deregulation of the sector. This will create a number of advantages for the economy.

“It will free resources for investment in critical infrastructures such as power, roads, the rail systems, health sector, education sector etc. The deficiency in all of these infrastructure areas are phenomenal. Fixing infrastructure will greatly improve productivity and efficiency in the economy and impact positively on the welfare of the people.

“It will boost private investment in the downstream oil sector especially in petroleum product refining. This will ultimately reduce importation of petroleum products and ease the pressure on the foreign exchange market as well as foreign reserves.

“It will eliminate the rampant patronage, rent seeking activities and corruption that currently characterise the downstream oil sector. It will create more jobs for the teeming youths of the country in the downstream oil sector as investment in the sector improves.

“Having said that, it is desirable for a clear policy pronouncement to be made in order to give a clear direction to investors. There is still so much policy uncertainty with regard to the downstream oil sector and this is creating lots of problems for investors.”


– Vanguard

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