By Adewale Sanyaolu and Chinwendu Obienyi
Despite public outcry over it’s huge borrowings, the Federal Government has, yet again, set aside N3.36 trillion for fuel subsidy (January to June) in the 2023 budget.
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, disclosed this during the public presentation of the 2023 Federal Government budget.
Ahmed disclosed that in the 2023 fiscal period, government has provided a whopping N3.36trillion for fuel subsidy payment to cover the first six months of this year.
This, she stated, was in line with the 18-month extension announced in early 2022.
She said, “The projected fiscal outcome in the 2023 Budget is based on the PMS subsidy reform scenario.
“In the 2023 Budget framework, it is assumed that petrol subsidy will remain up to mid-2023 based on the 18-month extension announced early 2022.
In this regard, only N3.36trillion has been provided for PMS subsidy. There will be tighter enforcement of the performance management framework for Government Owned Enterprises that will significantly increase operating surplus/dividend remittances in 2023.”
But retailing this provision, the President, Petroleum Products Retail Outlets Owners Association (PETROAN), Mr. Billy Gillis-Harry, warned that the Federal Government decision to continue with subsidy payments was a policy that should not be encouraged because it will further impoverish Nigerians.
He said it was fool-hardy for the Government to continue along the line of borrowings for the purposes of consumption, saying this will further put a strain of government’s lean resources.
He said the N3.36 trillion set aside for subsidy could be put into the rehabilitation of one or two refineries, thus creating thousands of indirect jobs and adding value to hydrocarbon resources as against importation of petroleum products.
Gillis-Harry said the ultimate solution to the downstream crisis of acute shortage of petroleum products was the full deregulation of the sector which would help free -up resources.
‘‘This is the right time to abolish subsidy. What the current administration has done is to push the removal of fuel subsidy to the next administration to contend with, when it could have simply implemented same now,’’.
Recall that the Nigerian National Petroleum Company (NNPC) Limited had in August 2022, said it deducted N525.71 billion as a shortfall for the importation of petrol (subsidy) in the same month
Subsidy or under-recovery is the underpriced sales of premium motor spirit (PMS), better known as petrol.
The national oil company said this in its monthly presentation to the Federation Account Allocation Committee (FAAC) meeting on Friday, September 23.
The FAAC document showed that due to the subsidy payment, the oil company failed to remit any funds to the federation account for the eighth consecutive time.
“The sum of N525,714,373,874.60 being federation account share was used to defray value shortfall/subsidy for the month,”.
The value shortfall on the importation of PMS recovered from August 2022 proceeds is N525,714,373,874.60 while the outstanding balance carried forward is N983,365,057,776,20.
The sum of N525,714,373,874.60 applied to defray value shortfall/subsidy is made up of $2,337,591.52 being 40 percent of PSC.”NNPC Limited said.
In January, February, March, and April 2022, the petrol subsidy gulped 210.38 billion, N219.78 billion, N245.77 billion, and N271.13 billion, respectively. Also, in May, June, and July, the country spent N327.07 billion and N319.18 billion, and N448.78 billion, respectively.
Daily Sun investigations in September 2022 had projected that the N4 trillion set aside by the Federal Government for fuel subsidy in 2022 budget may eventually hit N7.372 trillion by year end.
The Nigerian National Petroleum Company Limited (NNPCL) had in a post on its verified Twitter Handle pegged Nigeria’s average Premium Motor Spirit (PMS), popularly called petrol supply at 68 million litres per day.
The firm also put the average subsidy on petrol at N297 per litre and an annual estimate of N6.5 trillion on the assumption of 60 million litres per day.
The Federal Government had set aside N443 billion for fuel subsidy in 2022 but later returned to the National Assembly for an incremental expense from N443billion which it had planned up to N4 trillion.
If the current estimate of 68 million per day figure by the NNPC is sustained, Nigeria would have spent N7.372 trillion by December 31, 2022(68 million litres/day multiplied by N297/litres in 365 days gives N7.372 trillion Naira) which is an increase of N3.372 trillion over the N4 trillion budget.
NNPC added that between January and August 2022, the total volume of petrol imported into the country was 16.46 billion litres, which translates to an average supply of 68 million litres per day. Similarly, it said import in the year 2021 was 22.35 billion litres, translating to an average supply of 61 million litres per day.
Also reacting Mallam Kurfi Garba, CEO APT Securities said “What do you want them to do? Everyone in government has to subsidise this or that because of the elections asthey do not want to fail at the elections and so if they make provision, they have no choice. The very days fuel was scarce, we bought about N200 plus here in Lagos but now, fuel stations are selling at a cost price of N169 or N170 per litre. Truth be told, any government that wants to remove subsidy has to be ready to fight everyone. Maybe they would gradually remove subsidy because if you look at it, there is no subsidy in kerosene, diesel, gas, aviation but there is subsidy in electricity and this is the main reason Nigerians are not getting enough of it.
If you remove subsidy in electricity, everyone will have access to it, even private investors are ready to generate enough power but are we willing to pay? The answer is no. No doubt we want subsidy out of the way but for now, we have to leave it because there is no alternative to it for now. If you want efficiency in everything, let the market dictate it because once the market is not allowed to dictate the price, then you have to subsidize and this is what is being currently done to PMS.
Also speaking former Chairman, Major Oil Marketers Association of Nigeria(MOMAN) Mr. Tunji Oyebanji, worried that monies that are meant for development of sectors that need urgent attention is being wasted on subsidy.
‘’What government does or dosen’t do seem not not bother industry players anymore,’’.
He said all operators will have to tow the line of government policies, saying those that are dissatisfied have been forced to leave.
Oyebanji explained that some of those unfavourable policies may have informed the decision of some International Oil Companies(IOC) to scale down the level of their investment because they are not sure some of government policies are the best. He regretted that the issue of subsidy has become more political that people don’t look at it objectively anymore because it is out of fashion.
“There is nothing to say about subsidy anymore that has not been said in the past,”.