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Chinenye Anofuru
Last week’s announcement by the Petroleum Products Marketing Company (PPMC) of a new ex-depot price of N151.56, raising pump price to N161 per litre signposts the end of subsidy, Daily Sun can reveal.
Economic experts describe the action as long overdue, following Federal Government’s desire to stop the corruption-ridden fuel subsidy regime, which had benefitted only a few.
Subsidy payment had continued to increase over the years, hitting N1.149,385 trillion in 2019, a year when only a mere $1 billion was provided in the budget, forcing a massive deficit. Government had to patch through borrowing.
Sources disclosed that the burden the Nigerian government is shedding with the withdrawal of subsidy payments, led to the increase in pump price.
Analysis of cost shows that with landing cost of petrol currently at N207.98, government would have to pay N62.98 subsidy per litre of petrol and the Nigerian National Petroleum Corporation (NNPC) has to defray an estimated N3.149 billion per day under what is tagged “under-recovery.”
Experts agree that this cannot be sustainable in a country such as Nigeria, where the subsidy fund could do a lot to develop critical infrastructure to grow the economy.
The argument against subsidy payment is buttressed by the current lopsided situation where Nigeria’s low fuel price has encouraged smuggling of the product to other West African countries where prices are far higher.
Checks revealed that, in Niger Republic, which borders Katsina State, petrol sells for N346 per litre, while, in Cameroon, it sells for N449. In Ghana, it is N332, while in Benin Republic it sells for N359 per litre.
According to data from www.globalpetrolprices.com, Nigeria is the only country in West Africa where petrol sells for less than N200 per litre, and this has allowed unscrupulous marketers to promote smuggling of the product to the detriment of the country.
Experts fault the argument that Nigeria is an oil-producing country and should provide petrol at cheaper price, since the country has relied largely on importation for local consumption.
Nigeria’s refineries have not worked at optimum capacity in the last two decades due to lack of maintenance and corruption in public expenditure. The country now has the opportunity to invest the huge sums that would have gone into subsidy payment into the four refineries to make petrol available locally, which is the only viable way the product can be cheaper.
Those who protested against removal of subsidy under the President Goodluck Jonathan government did so because of lack of confidence in the ability of the administration to manage the surplus fund well, in view of the widespread perception of the his administration as corrupt and unwilling to stop the squandering of public resources. The President Muhammadu Buhari administration would have to demonstrate that public resources would no longer be imprudently managed and show a desire to invest in capital projects across the country.
Many would argue that some opposition political parties criticising the Buhari administration as a result of the withdrawal of fuel subsidy are being hypocritical because they know it is the right thing to do.
In 2012, when Nigerians resisted the Jonathan government’s attempt to withdraw fuel subsidy, Prof. Ngozi Okonjo-Iweala was quoted in a TELL Magazine interview as saying, “Nigerians would have to decide whether they want to remove fuel subsidy or they want the country to collapse.”
Those words are even truer today after emerging from a devastating COVID-19 pandemic economic lockdown.
As noted by the Minister of State for Petroleum, Timipre Sylva, removal of subsidy and the deregulation of the oil sector are an economic imperative.
He said government “is no longer in the business of fixing prices for petroleum products; we have stepped back. Our focus now is on protecting the interest of the consumers and making sure that marketers are not profiteering.”
