Disproving widespread expectations that the signing of the Petroleum Industry Act (PIA) would usher in the deregulation of the downstream sector, especially the removal of subsidy, the Federal Government, yesterday, said the retail price of Premium Motor Spirit, otherwise called petrol, will remain at N162 per litre until a feasible framework is developed.
Recall that the government spent N438.37 billion on subsidy payments as of June 2021. The removal of subsidy will lead to an upward review of petrol retail price, rising to at least N400 a litre.
The Group General Manager in charge of Public Affairs Division of the Nigerian National Petroleum Corporation (NNPC), Garba Deen Muhammad, confirmed yesterday that fuel subsidy would remain, pending the outcome of the current negotiations with labour unions in the country.
He said there would be chaos in the country if the subsidy was removed now. “The government is discussing with labour to find a lasting solution to the concern,” he said.
Marketers and state governors have been pushing for the removal of subsidies, considering its effects on their monthly allocations and contributions of the Nigerian National Petroleum Corporation (NNPC) to the Federation Accounts Allocation Committee (FAAC).
In its latest funding performance, the NNPC recorded N281.97 billion as net revenue to FAAC between January and June 2021, leaving a deficit of N973.86 billion as against the projected revenue of N1.25 trillion for the period. The Corporation did not make any remittance in April.
With oil prices experiencing a rebound, the Federal Government might continue to find it difficult to sustain subsidy payments, or even borrow to fund subsidies, but continue to avoid a backlash from households dealing with poverty and inflation.
Subsidy payments have continued to rise, not just due to low production, but as a result of the surge in consumption, especially from smuggling and other related activities.
The Controller-General of Nigeria Customs Service (NCS), Col. Hameed Ali (rtd.), on Monday, in Abuja at the public hearing organised by the House of Representatives’ Committee on Finance, lamented that petrol was being smuggled out of Nigeria in large quantities after it has been subsidised by the Federal Government. According to him, the product is being diverted to as far as Mali.
He further lamented that the Department of Petroleum Resources (DPR) had approved the establishment of filling stations along the land borders, while the NNPC keeps supplying the commodity to the stations against Customs’ advice. This, Ali said, was responsible for the increasing volume of fuel being released by the NNPC as daily consumption.
Chairman of the committee, James Faleke, had earlier asked the Minister of Finance, Budget and National Planning, Zainab Ahmed, why the Federal Government has projected crude oil per barrel at $57 for the 2022 budget when the global market prices are now about $70.
Ahmed, however, said the government was using the differentials to pay subsidies on petrol, which is referred to as under-recovery.
