NNPC Provides Update on Why FG Can’t Remove Fuel Subsidy Now
The Nigerian National Petroleum Corporation, oil marketers and experts on Sunday explained why the Federal Government could not stop petrol subsidy despite its non-inclusion in the 2022 budget.
Independent Petroleum Marketers Association of Nigeria and experts including a professor of Economics at the Olabisi Onabanjo University, Ago Iwoye, Ogun State, Sheriffdeen Tella, in separate interviews with The Punch, said it would be disastrous for government to stop the subsidy without functional refineries in the country.
A study of the allocations for the ministries of finance and petroleum resources in the 2022 budget showed that the Federal Government made no provision for petrol subsidy for the coming year.
However, it was learnt on Sunday that the commodity might still be subsidised in 2022, as the country’s sole importer of petrol, the NNPC, stated that there had been no counter order on subsidy from the Federal Government.
The corporation’s Group General Manager, Group Public Affairs Division, Garba-Deen Muhammad, in an interview with The k, confirmed that fuel subsidy would not be stopped until government and labour concluded their talks on the issue.
For more than four years, the NNPC had remained the sole importer of petrol into Nigeria, as other oil marketers stopped importing the commodity due to their inability to access foreign exchange and the occasional fall of the naira against the United States dollar.
Muhammad insisted that until negotiations with labour unions were concluded, the price of the commodity would remain the same, stressing that the Minister of State for Petroleum Resources, Chief Timipre Sylva, had earlier stated this.
“I know that the negotiations are ongoing and the minister, when he spoke, he made it clear that no conclusion would be reached and no decision (on subsidy) will be taken until the negotiations are concluded. That is still the situation.”
When pressed further on whether NNPC would continue to shoulder the humungous financial burden of subsidy, the GGM replied, “Yes, the NNPC has not made noise about the burden it is carrying.
“And it is something I cannot pass any judgment on because the higher authorities have spoken. The minister the GMD (Group Managing Director of NNPC, Mele Kyari) have spoken that they are engaging labour.
“This is because labour represents the Nigerian people and it is until the negotiations are concluded that the decision will be taken.”
The Petroleum Industry Act, which was passed in August this year, does not give room for petrol subsidy.
Reacting to the issue, IPMAN outlined some factors that should be met before the Federal Government would halt subsidy on petrol.
IPMAN’s National Public Relations Officer, Chief Ukadike Chinedu, stated that getting the country’s refineries working was the major factor that must be addressed.
“It will be very disastrous for the Federal Government to remove subsidy without implementing certain factors. The main factor is that the government should ensure that all the refineries are in good working conditions.
“The other is that there must be a level playing ground for modular refineries to be operational in order to boost local production and counter the foreign exchange concerns we face in this country.
“The importation of petroleum products drives subsidy and so if we no longer import these products, we will deal with the concerns of forex. So the NNPC and the government have a lot to do in order to take care of these things before they halt petrol subsidy.”
We can’t escape subsidy now or price will skyrocket – Economist
Also, an economist, Tella, said refineries should be fixed before subsidy could be efficiently stopped.
“The fuel subsidy is not supposed to continue but the fact that our refineries are not working simply means that we can’t escape it, else the price would just skyrocket.
“Since they said it is not in the budget, and NNPC would shoulder it, actually the NNPC has its budget. It would not affect the expenditure but it would affect what comes to the Federal Government and its allocation.”
Subsidy now political matter, all Nigerians shouldering it, says ex-LCCI DG
Commenting on development, the immediate past Director-General of the Lagos Chamber of Commerce and Industry, Dr Muda Yusuf, said the matter of petrol subsidy had become political.
He also noted that all Nigerians were shouldering the burden of petrol subsidy, as the NNPC had been deducting some of the subsidy costs from its remittances to the Federation Accounts Allocation Committee monthly.
“The political will to deal with the subsidy issue is one of the biggest challenges that we have and in fairness to the government, it is also a politically difficult matter to deal with, especially as we get closer to the elections in 2023.”
But a political economist and former presidential candidate, Prof Pat Utomi, said there was a lot of dishonesty fuel subsidy.
“This matter should have been sorted a long time ago. However, we don’t know who profit from them and there is a lot of dishonesty, so we cannot engage the people on what we must do.
“I have always been against the idea of subsidy without a specific goal of what you will achieve with the subsidy. If you are going to subsidize to generate production so that you can boost production in an area, and then you make the subsidy of whatsoever it is for a limited period to achieve the production levels that you want, then I can understand subsidy. “
Another expert and the Managing Director/Chief Executive, SD&grin Capital Management Limited, Idakolo Gbolade, however, argued against the removal of the subsidy now, stating that this action would further diminish the welfare of Nigerians.
He said that the subsidy should only be removed when the country achieves self-sufficiency in the refinery of its own petrol.
“In as much as I know that the fuel subsidy is fraught with a lot of irregularities and unaccounted funds, I still believe that the government should retain it, whichever mechanism or method use until Nigeria is self-sufficient in refining its own crude oil.
“We are getting close to that if it is possible for the private refinery launched by Dangote to come to life. I believe that we should have enough refined petroleum for the country.
“At that point, if the subsidy is removed, Nigerians won’t feel the brunt so much because it will be traded based on the foreign cost of crude and it will be refined here in Nigeria without landing charges and other charges,” he stated.
He added that public officers who are campaigning for the discontinuation of the subsidy are doing so for their own selfish interests as the subsidy is one of the few ways the federal government impacts the Nigerian populace directly.
According to him, “Those who are clamoring for the subsidy to be removed now are doing so for their selfish interests, I can tell you that this is one of the very few dividends that the Nigerian people are getting from the government, it is the regulated price of petrol. If it is removed now, it will have an untold hardship on the average Nigerian.
“This is the only thing that the government is using to touch the grassroots.”
A senior lecturer of Economics at the Pan Atlantic University, Dr Olalekan Aworinde, said that the removal of subsidy is a welcome development if the money is used efficiently to better the lives of Nigeria.
“In the budget that was released, if the government does not earmark any money for subsidy, it means that the government is ready to remove the subsidy. Although NNPC may say they may continue, but how are they going to fund it? Basically, we should be ready for the worst as government is ready to remove subsidy from the price of petrol.
However, I can say it is a welcome development. If government will use the money previously used for subsidy, if they will sue it judiciously, for the country to see a multiplier effect of that money, that is fine.
“However, the problem is that we might not really see the multiplier effect if the money for subsidy is removed. This government is engrossed in fraud, corruption and so on. So, I do not believe that they will be able to spend the money efficiently. That is the issue. But the most important is that government will remove that subsidy, which will curtail a lot of things because the subsidy itself is a fraud. It is better to end the fraud.
“If there government stops the subsidy, the first advantage is that we are not going to have a situation of subsidy fraud. Also, the market will be more competitive in the sense that people can now bring in fuel without the government influencing things.
Also, when supply is more than demand, it would push the price down. Also, we can begin to see the impact of the money spent on subsidy earlier. Increase in capital expenditure will better the lives of people. It may also help with the debt stock of the government.
These are some of the advantages we can get. However, if it is not well implemented, we will not see the multiplier effect of this,” he said.