* Don’t touch the PIA- experts cry out
Lagos — With about N10 trillion, expended on financing petrol subsidy in 13 years, Nigeria is said to have resulted to borrowing to finance its national budgets.
Experts says the sum of N9.84 trillion was spent between 2006 and 2018.
This has generated controversies on whether or not to retain the subsidy, as the country’s external debt hit $31 billion and increasing to a projected $36 billion. Its debt service burden is also already in the excess of 96% of independent revenue.
While some experts have argued that the country can no longer fund petrol subsidies owing to the backlog of challenges it has created in the downstream sector, others have argued that its removal puts burden on the masses who would be at the mercy of oil marketers, and would be made to bare the burden of increasing petrol prices.
After months of back and forth dialogues with industry stakeholders, including labour unions, the federal government in January dashed the hope of oil marketers when it decided to postpone removal of fuel subsidy it had earlier slated for June 2022. Its argument was that removal would further heighten growing economic inflation rates.
A whopping N9.84 trillion lost to subsidies in 12 years would have placed the country in the league of developed countries if spent on infrastructure.
By estimation, the sum of N9.84 trillion would have fetched the country; 60, 000 fully equipped primary health centres across the country at N30 million each, 100, 000 Nigerian children provided with educational support through tertiary level at N5 million each, 10, 000km of roads constructed across the country at N500 million each, 10000 entrepreneurs (including farmers) given capital for start-ups or business upgrade at N1 million each, and 100, 000 Nigerians insured by the Nigerian Health Insurance Scheme, NHIS at N15, 000 each.
Countries around Nigeria continue to have significant higher petrol prices than Nigeria due to taxes they charge on fuel consumption, which had led to a continued propensity to smuggle petrol across boarders. Therefore, retaining subsidy invariably means that Nigeria is not only subsidizing its own economy but also that of its neighbours, experts have argued.
While President Buhari’s administration seems to have pushed subsidy removal to the incoming government, oil marketers have continued to canvass for deregulation of the downstream sector, advising the government to put structures in place to cushion the effect of eventual subsidy removal on the masses.
According to them, price control will not only lead to pressure to restart subsidies when international fuel prices go up, but will also strongly discourage private capital from investing to develop the petroleum sector through refineries, ancillary and derivative industries which is the clear path to develop the country resources to become the refining hub of West Africa and grow the country’s GDP.
Economists believe that in the medium to long term, market competition drives down prices to its optimal best.
Management and financial expert, Dr. Biodun Adedipe told SweetcrudeReports that issues such as food inflation which is the major component of the inflation rates in Nigeria, and mass transportation must be dealt with before the time when the subsidy removal finally arrives.
“Food inflation, mass transportation are some of the challenges of subsidy removal that our leaders should begin to put in place so that the ordinary man on the street will not see subsidy removal as suffering”, he added.
Olumide Adeosun, Chairman, Major Oil Marketers Association of Nigeria, MOMAN, said the association awaits federal government’s plan before the 18 months period of the subsidy removal pause elapses.
“Oil marketers make a lot of investment in the downstream sector, and the people should know that the burden of subsidy is not just on the government buy also on us. And for every seconds it is delayed, the burden gets increased. We stand with the government on the delay however, we need the plan now. We must not lose focus during the pause period. To what extent do we need to get involved in managing the transition plan, else, we would see that the waiting period would elapse without anything being put on ground for the transition”, he said.
To exit petrol subsidy, former NNPC executive, Rabiu Bello said government must ensure efficiency, competition and transparency of the downstream sector.
Asked about his opinion on proposed amendment of the Petroleum Industry Act, PIA, he said ” the federal government should not amend the Act, but rather use the financial bill.
“I advise the government not to touch the PIA. Instead, the financial bill can be used to make changes in the budget and to suspend any law. We have been on the PIA for years now. We will look unserious if we tamper with it”, he said.
Timipre Sylva, Nigeria’s minister of state for petroleum had after a press briefing on subsidy organized by the Presidential Communication Team at the presidential villa, Abuja, said government does not intend to remove subsidies now, however, said the PIA would be amended to reflect development in payment of subsidies before the 18 months window elapses.
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