As part of measures to check the ongoing scarcity of fuel across the country, the Federal Government last week said it paid N156 billion to oil marketers, bringing total payment to over N500 billion in five months, including over N300 billion in two instalments in December last year and N31 billion in interest differentials recently.
Investigations by Daily Independent at the weekend, showed that Abuja has so far paid N6.354 trillion as subsidy for petroleum products since 2010, when President Goodluck Jonathan assumed leadership of the country.
In 2010, a total of N673 billion on subsidy, rising significantly to N1.3 trillion in 2011, before being revised upward to N2.19 trillion by the Ministry of Finance, after arrears were paid in 2012 for products consumption in 2011.
In 2012, the sum of N888 billion was allocated to subsidise petroleum product imports in the budget, but in December a supplementary budget of N161.6 billion for payment of arrears of fuel subsidy was submitted by the president and later approved by the National Assembly.
By the following year, the government earmarked N971 billion for petroleum subsidy.
For 2014, the Federal Government again budgeted N971.1 billion for payments of subsidy, keeping it at the same level with that of 2013.
Though, despite insinuations and reports that there was no provision for fuel subsidy in the 2015 budget, the Senate Committee Chairman on Finance, Ahmed Makarfi, cleared the air, when he said a total of N100 billion was provided for as subsidy for Premium Motor Spirit (PMS), while N43 billion was approved for Dual Purpose Kerosene for the 2015 fiscal period.
Makarfi explained: “For you to see them, you have to go through the revenue profile. In this year budget, N100 billion was provided for Premium Motor Spirit, N43bn for DPK.
“The Federal Government in 2013, budgeted the sum of N970 billion for fuel subsidy, out of which N515 billion was released to oil marketers.
“In the 2014 fiscal period, the same N970 billion was budgeted for fuel subsidy while N414 billion was released,” he said.
He noted that while the amount budgeted for this year may not be enough to subsidised petroleum products, the law allows for a request of additional funding when the need arises.
Based on the huge amount spent on subsidizing the importation of petroleum products, stakeholders in the oil and gas industry as well as economists have condemned the continued payment of subsidy, advising that government should deregulate the downstream oil sector and the market forces to determine the prices of petroleum products in the country.
Even Minister of Petroleum Resources, Diezani Alison-Madueke, agreed that the payment of subsidy on petrol ‘cannot be sustained any longer.’
She said the continued regulation of the downstream sector has its positive and negative impact on the economy, but noted that the negative effect is more than the positive.
“The subsidy policy cannot be sustained any longer. This is because the subsidy payment did not benefit the poor it was targeting, but rather it is benefiting the rich,” the minister said.
She spoke of the need to deregulate the downstream oil sector to attract investors, adding that in considering the deregulation of the downstream sector, government must strike a balance in implementing some of its policies to An analyst, Eniwoareke Egbeme, called for the removal of subsidy.
“The fact is that the Nigerian economy cannot continue to sustain the subsidy on petroleum products. For instance, in 2013, Nigeria spent N832 billion on petroleum subsidy, which is 16.7 percent of the 2013 budget.
“According to the (CBN), about $8.46 billion (or N1.35 trillion) was spent on kerosene subsidy between January 2012 and July 2013; amounting to about 153 per cent of the combined allocation to education, health, and agriculture in the 2013 budget,” he said.
President of Lagos Chamber of Commerce and Industry (LCCI), Alhaji Remi Bello, noted that the Chamber appreciated the enormity and dimensions of the potential short term impacts of subsidy removal on the economy and the citizens.
Bello said a review of the subsidy regime would result in increased private investment in the downstream oil sector with a corresponding impact on the creation of quality jobs, reduction in the pressures on foreign reserves, a huge chunk of which is currently being used to fund fuel importation, and better fiscal space to ensure macroeconomic stability with a resultant positive effect on the economy.
Also, oil marketers under the aegis of the Depot and Petroleum Products Marketers Association (DAPPMA) called for the deregulation of the downstream subsector of the country’s oil and gas industry.
DAPPMA Chairman, Dapo Abiodun, said the downstream sector deregulation would lead to a complete removal of subsidy for refined petroleum products, including kerosene.
“Our association has closely been following the Senate proceedings on the issue that touches, among others, on the kerosene subsidy controversy.
“Generally, DAPPMA has for the past 10 years actively canvassed for a complete deregulation of the downstream sector of the Nigerian oil and gas industry with its attendant benefits for the sustenance and growth of that vital sector of the economy.
“If indeed implemented, one of the key features would have been the complete removal of subsidy on refined petroleum products including kerosene.
Also, the Executive Secretary, Major Oil Marketers Association of Nigeria (MOMAN), Mr. Femi Olawore, said deregulation is the answer to the problems associated with the downstream sub-sector. According to him, “The removal of fuel subsidy and introduction of full deregulation of the downstream sector will bring efficiency to the sector and end the perennial fuel crisis,” he said, adding that the perennial cycle of fuel scarcity could be blamed on discrepancies in subsidy payments and delay in the passage of the Petroleum Industry Bill (PIB) by the National Assembly.
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