New Telegraph

BudgIT backs calls for fuel subsidy removal

Civic organisation, BudgIT, has said that it supports calls in some quarters for the Federal Government to scrap the subsidy on imported petroleum products. It, however, stressed that government should ensure that it puts “palliative measures” in place in order for the public to support the move.

 

The organisation stated this in a statement in which it urged the Federal Government to ensure timely implementation of the Petroleum Industry Act (PIA). The statement quoted BudgIT’s Extractive Lead, Adejoke Akinbode, as saying that “the current cost of petroleum subsidy to Nigeria along with other socio-economic implications necessitates its removal.

 

Nevertheless, a couple of palliative measures must be in place for subsidy removal to gain public acceptance.” New Telegraph reported that last Thursday, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, disclosing that Nigeria spent N18.39 billion on petrol subsidy payments per day.

 

The minister stated this during an inquiry by the House of Representatives committee investigating petroleum products for subsidy regime from 2013 to 2022. She said: “For 2023, the projection is that the average daily truck-out will be N64.96 million per day; that is about 65 million per day, using an average rate at open  market rate of N448.20 and then a regulator pump price of N165 per litre.

 

This gives us an average under- recovery, that is the difference between N165 and N448, of N283.2. “So, just multiply the amount of litre per day, the open market exchange rate of naira to the dollar and then, the gap between the pump price and open market price, the total amount of subsidy per day is N18.397 billion.

 

“So, if you are projecting for the full year, from January to December, it will be N6.715 trillion. If you are projecting for half a year, it will be 50 per cent of that, N3.375 trillion. I said earlier in the recommendations that we sent to parliament for consideration on MTEF is half-year, that will be N3.357 trillion.

 

“Fuel subsidy is the difference between the pump price, which is now fixed at N165 (per litre) and the landing cost, which we are projecting at an average of N448 per litre in 2023. Even now, the cost is around that.

 

“So, the PMS subsidy we are carrying today in the nation is around N283 per litre; that is what we are carrying. So, it is the difference between the pump price and the landing cost of petroleum products in the country.”

 

The Federal Government has projected to spend N6.7 trillion on petrol subsidy payments in 2023. Meanwhile, commenting on the delay in full implementation of the PIA, BudgIT said in its statement that “despite expectations, PIA has been met with mixed reactions, especially in oil-producing communities, necessitating urgent advocacy and engagements to scale up public enlightenment, promote conversations and improve public perception regarding the PIA.

“While stipulated timelines are specified for the Act’s implementation and operationalisation, the government has also taken the necessary steps to effectuate actions. For instance, we have seen the transformation of the former Department of Petroleum Resources (DPR) into the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

 

At the same time, the defunct Petroleum Products Pricing Regulatory Agency (PPPRA) also transitioned into the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

 

“Another notable action is the Nigerian National Petroleum Corporation’s transitioning into a limited liability company under the Companies and Allied Matters Act (CAMA). The new company, unveiled by President Buhari on July 19, 2022, is now regarded as the Nigerian National Petroleum Company Limited (NNPC Limited).

 

“To reiterate, NNPC Limited is saddled with coordinating the commercial aspect of the petroleum operations and engaging in the business of renewables and other energy investments. With this development, the NNPC Limited will compete commercially with its peers in the oil industry; as such, the entity is expected to be above board with its operations

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