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Subsidy: FG projects N1trn savings by September 2021

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The N653.51billion spent on petrol subsidy in 2015 was the lowest in three years

 

 

The Federal Government has estimated that it would save over N1 trillion by September 2021 from the removal of subsidy on Premium Motor Spirit (PMS) also known as petrol.

 

The subsidy removàl was effected on seprember 2, 2020, and a document of the Ministry of Petroleum Resources sighted by New Telegraph at the weekend showed that about N1 trillion would have been saved in one year folllowing the deregulation of the downstream sector of the petroleum industry.

 

The extra cash, the document quoted the Minister of State for Petroleum, Mr. Timipre Sylva, to have said, would be used to fund infrastructure development and to grow the nation’s economy.

 

“He urged Nigerians not to allow themselves to be fooled by critics of deregulation to create anarchy and chaos,” the document read. Using the data released by Petroleum Products Pricing Regulatory Agency (PPPRA), the document noted that the Federal Government spent a total of N8.94 trillion on oil subsidy between 2006 and 2015.

 

The subsidy was paid to oil marketers and the Nigerian National Petroleum Corporation (NNPC) in the period under review, the document read. A break down of the money indicated that in 2006, a total of N257.36 billion was paid, in 2007, N271.51 billion while in 2008 N630.57 billion was paid to marketers.

 

‘Also, oil marketers in 2009 were paid N409.31 billion and N667.08 billion in 2010 respectively as subsidy claims,” it said. The document further revealed that in the year 2011, federal government paid a total of N2, 105.92 trillion, an increase of N1,437.84 trillion from 2010 payment.

 

The PPPRA in the document noted that in 2012, N1.35 trillion was paid as subsidy, the highest in the period under review. “A total of N 1, 316.63 trillion in 2013, N1,217.35 trillion in 2014 and N653.51 billion in 2015 was paid as subsidy claims, “it added.

 

It noted that the NNPC since 2016 had being the sole importer of the product to the country. It assured that subsequent releases would revealed the amount paid on subsidy before the deregulation of the downstream oil sector.

 

The subsidy removal policy got the support of the Manufacturers Association of Nigeria (MAN) even as it lamented that its members spent N67.38 billion, which is 38 per cent of their operating costs, to self-generate electricity in 2019, while the unsold inventory of manufactured goods stood at N402. 4 billion.

 

Sylva said with subsidy removal, Nigeria would recover the losses incurred in selling products below the market price and the losses incurred in providing dollars at special rates to fund importation. The minister stated that successive administrations had attempted to deregulate but lacked the political will or the time was not good for the implementation of the policy.

 

Sylva noted that deregulation is a policy direction that is good for the common Nigerian because it is going to create many opportunities they could tap into to improve their socioeconomic conditions.

 

According to him, the refining sector is not developed because no refinery can operate commercially in Nigeria with a subsidy in place. He said: “I believe that this discussion around subsidy has been a vexed issue that has captured the imagination of this country for a long time now. Successive administrations have attempted to deregulate.

 

But sometimes, some administrations lacked the political will and at other times, the time was not good for it. And why did I say the time was not good for it? Does that imply the time is good for it now? “The problem around deregulation is that people must understand first, that the product we are talking about is a derivative of crude oil. It is refined from crude oil.

 

“Therefore, it has a direct relationship with the price of crude oil. If the price of crude oil goes up, then you expect that it would reflect in the price of the derivative. “So, the best time to achieve this we looked at was the time when crude oil prices are low so that Nigerians will get the benefit of those low prices.”

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