Malam Mele Kyari, Group Managing Director of NNPC

NNPC, experts, others explain why government cannot stop fuel subsidy now

*The Nigerian National Petroleum Corporation, experts and oil marketers have said the Federal Government cannot stop petrol subsidy at the moment, as doing so will be disastrous without functional oil refineries in the country

Isola Moses | ConsumerConnect

The Nigerian National Petroleum Corporation (NNPC), experts and oil marketers have explained to Nigerians reasons the Federal Government could not stop petrol subsidy as of now, despite its non-inclusion in the proposed 2022 Budget.

In separate interviews with The Punch, the Independent Petroleum Marketers Association of Nigeria and other experts, including Sheriffdeen Tella, a professor of Economics at the Olabisi Onabanjo University, Ago Iwoye, Ogun State, said it would be disastrous for government to stop the subsidy without functional refineries in the country.

A study of the allocations for the ministries of Finance and Petroleum Resources in the 2022 budget indicated that the Federal Government made no provision for petrol subsidy for the coming year.

However, it was learnt Sunday, October 10, 2021, that the commodity might still be subsidised in 2022, as the country’s sole importer of petrol, the NNPC, stated that there had been no counter order on subsidy from the Federal Government, report said.

Mr. Garba Deen Muhammad, Group General Manager, Group Public Affairs Division of the Corporation, in an interview also restated that fuel subsidy would not be stopped until government and Labour concluded their talks on the issue.

Muhammad further disclosed that until negotiations with Labour unions are concluded, the price of the commodity would remain the same.

ConsumerConnect had reported that H.E. Chief Timipre Sylva, Honourable Minister of State for Petroleum Resources, had earlier stated the Federal Government’s position on the matter.

The Minister, while featuring on a Channels TV programme, had stated “this is the only thing that the government is using to touch the grassroots.”

He said that there is currently no set date for petrol subsidy removal, as the government is being considerate of citizens.

H.E. Chief Timipre Sylva, Honourable Minister of State for Petroleum Resources

“I cannot give you a date for now. But the Vice President is actually leading the efforts and very soon, we will tell Nigerians what date the removal of subsidy will kick in,” said Sylva.

The NNPC Spokesman also said: “I know that the negotiations are ongoing and the Minister (Sylva) … made it clear that no conclusion would be reached and no decision (on subsidy) will be taken until the negotiations are concluded.

“That is still the situation.”

As regards the state oil firm’s reaction to the current subsidy burden in the downstream sector of the economy, Muhammad was quoted to have said “yes, the NNPC has not made noise about the burden it is carrying.

“And it is something I cannot pass any judgement on because the higher authorities have spoken. The Minister the GMD (Group Managing Director of NNPC, Mele Kyari) have spoken that they are engaging Labour.”

He added: “This is because Labour represents the Nigerian people and it is until the negotiations are concluded that the decision will be taken.”

However, keen observers have equally noted that the Petroleum Industry Act (PIA) 2021, which was passed in August this year, does not give room for petrol subsidy.

It’s disastrous for government to remove subsidy without functional refineries – IPMAN

Reacting to the issue, IPMAN outlined some factors that should be met before the Federal Government would halt subsidy on petrol in Nigeria.

Chief Ukadike Chinedu, National Public Relations Officer of IPMAN, said that getting the country’s refineries working was the major factor that must be addressed, report stated.

Chinedu noted: “It will be very disastrous for the Federal Government to remove subsidy without implementing certain factors.

“The main factor is that the government should ensure that all the refineries are in good working conditions.

“The other is that there must be a level playing ground for modular refineries to be operational in order to boost local production and counter the foreign exchange concerns we face in this country.

“The importation of petroleum products drives subsidy and so if we no longer import these products, we will deal with the concerns of forex. So the NNPC and the government have a lot to do in order to take care of these things before they halt petrol subsidy.”

We can’t escape subsidy now or price will skyrocket –Economist

Prof. Tella, an economist also said refineries should be fixed before subsidy could be efficiently stopped.

The Professor of Economics stated: “The fuel subsidy is not supposed to continue but the fact that our refineries are not working simply means that we can’t escape it, else the price would just skyrocket.

“Since they said it is not in the budget, and NNPC would shoulder it, actually the NNPC has its budget.

“It would not affect the expenditure but it would affect what comes to the Federal Government and its allocation.”

In his comment on the development, Dr. Muda Yusuf, immediate past Director-General of the Lagos Chamber of Commerce and Industry (LCCI), said the matter of petrol subsidy had become political.

Government should focus on subsidising food production, not fuel –Cowry Asset Group MD/CEO

Mr. Johnson Chukwu, Group Managing Director and CEO of Cowry Asset Management Limited, Lagos, has said that all Nigerian consumers are shouldering the burden of petrol subsidy, as the NNPC had been deducting some of the subsidy costs from its remittances to the Federation Accounts Allocation Committee (FAAC) monthly.

According to him, “the political will to deal with the subsidy issue is one of the biggest challenges that we have and in fairness to the government.

“It is also a politically difficult matter to deal with, especially as we get closer to the elections in 2023.”

However, Prof. Pat Utomi, a political economist and former presidential candidate, was quoted to have said there was a lot of dishonesty fuel subsidy in the country.

“This matter should have been sorted a long time ago. However, we don’t know who profit from them and there is a lot of dishonesty, so we cannot engage the people on what we must do.

“I have always been against the idea of subsidy without a specific goal of what you will achieve with the subsidy,” Prof. Utomi stated.

He further said: “If you are going to subsidise to generate production so that you can boost production in an area, and then you make the subsidy of whatsoever it is for a limited period to achieve the production levels that you want, then I can understand subsidy. “

Idakolo Gbolade, an expert and Managing Director/Chief Executive of SD&D Capital Management Limited, nonetheless, argued against the removal of the subsidy now.

He stated that this action would further diminish the welfare of Nigerians.

According to Gbolade, the subsidy should only be removed when the country achieves self-sufficiency in the refinery of its own petrol.

He said: “In as much as I know that the fuel subsidy is fraught with a lot of irregularities and unaccounted funds, I still believe that the government should retain it, whichever mechanism or method use until Nigeria is self-sufficient in refining its own crude oil.

“We are getting close to that if it is possible for the private refinery launched by Dangote to come to life. I believe that we should have enough refined petroleum for the country.

“At that point, if the subsidy is removed, Nigerians won’t feel the brunt so much because it will be traded based on the foreign cost of crude and it will be refined here in Nigeria without landing charges and other charges.”

He added that public officers who are campaigning for the discontinuation of the subsidy are doing so for their own selfish interests as the subsidy is one of the few ways the federal government impacts the Nigerian consumers directly.

Gbolade added: “Those who are clamoring for the subsidy to be removed now are doing so for their selfish interests.

“I can tell you that this is one of the very few dividends that the Nigerian people are getting from the government, it is the regulated price of petrol.

“If it is removed now, it will have an untold hardship on the average Nigerian.”

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