- Let the FG pay now even as it works on local refining of petroleum products
Perhaps one of the most troubling issues in Nigeria’s economy today is the question of unending subsidy in the downstream sector of the oil industry. Subsidy of course, is government paying the difference between cost of importing petroleum products and the selling pump price at the fuel stations.
This again suggests that Nigeria still imports the bulk of the petroleum products she consumes locally. This is true; she indeed imports nearly 100 per cent of all her domestic petroleum products needs sometimes. The reason is that all the four refineries are currently either shut down or operating at less than 10% of their capacity.
However, there is another angle to the subsidy matter. According to reports, private importers of petroleum products have claimed they are being owed hundreds of billions of naira in subsidy differentials arising from the products they imported over a year ago.
Olufemi Adewole, executive secretary of the Depot and Petroleum Products Marketers Association (DAPPMA) told the News Agency of Nigeria (NAN) that the Federal Government owed his members N650 billion in unpaid subsidy arrears.
This is posing a huge financial challenge to oil marketers and threatening the survival of their businesses, said Adewole. He noted that marketers have been forced out of business as banks had taken over their assets due to inability to service their credit facilities or pay back borrowed funds. While they claim that the sudden drop in the naira exchange rate against the dollar had distorted the bank loans, interest charges have also continued to compound and balloon the initial sums.
While we call on the Federal Government to move quickly to clear what is obviously legitimate demand in order to save the businesses of the oil marketing segment of the economy, we also seize this opportunity to ask that the matter of oil subsidy be addressed once and for all by the current administration.
One of the campaign promises of President Muhammadu Buhari was to do away with what was regarded as a most wasteful regime of subsidy which came to a head during the erstwhile administration of President Goodluck Jonathan. National protests had ensued in early 2012 when the former administration had hiked petroleum pump price.
Nigerians rejected the hike and in the ensuing national umbrage, it had come out that billions of naira was quietly being deployed as subsidy payouts to importers while much more money was being doled out to dubious importers who collected huge sums without delivering the goods.
Since then, the populace has awoken to the huge national haemorrhage known as subsidy today. In 2015, President Buhari had effected a hike in the pump price of premium motor spirit (pms) from N87 to the current N145 per litre. Nigerians had clamoured for a total removal of all forms of subsidy on petrol pump price as has been achieved in the case of diesel and in line with President Buhari’s vow to deal with the unending crises, especially in the downstream oil sector. But he has not done so till today.
On the contrary, news emerged that annual fuel subsidy under the current dispensation has climbed to a benumbing N1.4 trillion per annum. How could this be if we consider the fact that the Nigerian National Petroleum Corporation (NNPC) has been the sole importer of products in the last one and half years? This figure is by far higher than the figure which caused a riot in the last administration.
It has also emerged that domestic consumption is recorded to have gone up astronomically: from about 35 million litres per day during the Jonathan administration to the current 60 million litres per day. Industry watchers say it is improbable that Nigeria consumes such quantity of PMS per day; they say there is no economic basis for such huge rise.
Whatever the case may be, we urge the Federal Government to arise and address the decades-long crisis in Nigeria’s downstream sector of the oil industry now. And we admonish that there still is no alternative to building refining capacity where government would exert some control.
It must be mentioned too that the Federal Government, for the sake of transparency and accountability, must seek appropriation from the National Assembly before releasing subsidy payments.
