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•Says scheme gulped N13.697 trn in 16 years
From Uche Usim, Abuja
The Nigeria Extractive Industries Transparency Initiative (NEITI) has thrown its full weight behind President Bola Ahmed Tinubu’s decision to end the petrol subsidy regime.
NEITI in a statement released on Tuesday said Tinubu’s pronouncement signifies an audacious step towards ending the scheme that has gulped N13.697 trillion between 2005 and 2021.
“This bold step is required to block leakages, grow revenues and advance the ongoing reforms in the oil, gas and mining industries”, it said in a statement.
NEITI recalled that its recommendations for the removal of fuel subsidies have remained a persistent request since 2006 given the agency’s concerns about the huge financial burden that the subsidy regime imposed on the growth of the Nigerian economy over the years.
From the NEITI reports, between 2005 to 2021, the country spent $74.3862 billion which translates to N13.697 trillion.
According to the NEITI report, a breakdown of these figures showed that in 2005, the government paid $2.6 billion (N351billion) as subsidy. In 2006 & 2007, it paid $1.99 billion & $2.176 billion (N257 billion & N272 billion) respectively.
The report further pointed out that subsidy payments more than doubled in 2008 and 2010 and witnessed the highest increase ever in 2011 to $13.52Billion (N2.11Trillion). A sharp decline was witnessed in the years 2012, 2013, 2014 and 2015 when it dropped to $3.336Billion (N654Billion) in 2012. The decline in subsidy expenditure continued in 2016 and 2017 to as low as $473Million (N154Billion) in 2017. The reduction was short-lived as the payments skyrocketed to over $3.88Billion (N1.190Trillion) in 2018 and 2021 to $3.575Billion (N1.43Trillion). By these figures, Nigeria expended an average of 805.7Billion Naira annually, 67.1Billion monthly or N2.2Billion daily.
The NEITI data, in addition, showed that the amount expended on subsidies from 2005 to 2021 is equivalent to the entire budget for health, education, agriculture and defence in the last 5 years. The sum also equals the capital expenditure for 10 years between 2011-2020. Subsidy payment reached its peak in 2011 ($ 13.52 Billion or N2.11 Trillion). NEITI explained that it was during this time (2011) that fuel subsidies dwarfed allocations to all critical areas of the economy.
NEITI ‘s persistent calls for the removal of petroleum subsidies were informed by the fact that the ways and means of funding the expenditure over these years relied more on federation accounts funds, the federal government and sometimes from external borrowing with negative consequences on government overall revenue profiles.
NEITI said it was also concerned that the consequences of funding subsidies have resulted in poor development of the downstream sector, declining GDP growth, rise in product theft, pipeline vandalism, environmental pollution and undue pressure on foreign exchange. Other challenges imposed on the economy were naira depreciation, low employment generation, the declining balance of payments and worsening national debt.
In a policy advisory released by the NEITI House in late 2022 to drive home the urgency to remove subsidy and re-submitted earlier in the year 2023, NEITI recommended eight steps to manage subsidy removal when and if the decision is made. These include the urgency to strengthen the implementation of the Petroleum Industry Act (PIA) as a whole and not in parts. NEITI also underlined the importance of unveiling the implementation of people-oriented welfare programs to provide relief for the poor and vulnerable; advised on priority attention to be paid to the rehabilitation of the nation’s four refineries currently ongoing while encouraging private investments in establishing new refineries. Other policy considerations are that government should commission a special report on actual PMS consumption in Nigeria, enforce stringent sanctions for criminal activities in the oil and gas sector and conduct appropriate stakeholders’ consultations, engagements and enlightenment.
