Mr. Bismarck Rewane, a member of President Muhammadu Buhari’s Economic Advisory Council, has disclosed that Nigeria has no choice but to continue to pay subsidy on petrol beyond 2023, until the country is able to achieve a certain level of local petroleum products refining capacity, deal with pipeline vandalism, crude oil theft and end corruption within the oil and gas industry value chain.
He made this known in his presentation highlighting the Nigerian oil and gas downstream challenges at the just concluded 2022 OTL Africa Downstream Week in Lagos.
EnergyDay confirmed that the President Buhari, whose tenure is due to end on May 29, 2023, had made provision in the budget to pay petrol subsidy till June 2023.
The President had in a speech on the presentation of the 2023 budget proposal before a joint session of the national assembly on Friday, October 7, said that petrol subsidy will be discontinued in June 2023.
EnergyDay’s check showed that Nigeria has spent N4 trillion on fund fuel subsidy in 2022 alone, with plan to spend another N3.36 trillion up to mid-2023 based on the 18-month extension announced in early 2021.
The Chief Executive Officer of Financial Derivatives Company Limited (FDC), however, described the payment of petrol subsidy as a hydra-headed monster that would be very difficult to combat if the challenges upstream, midstream and downstream sectors still persist.
According to him, subsidy removal and reduction can only happen if the country is able to guarantee a certain level of refining capacity within the period of the proposed removal.
He said, “Nigeria have redundant refineries that the Government has been spending so much tax payers’ money to keep afloat, which has gone beyond what the country can afford.
Bismarck affirmatively noted that President Muhammadu Buhari has not promised to remove Nigeria’s petrol subsidy in 2023, but actually said that “Nigerians” would remove the controversial bills next year.
He said there is no evidence to support the commitment by any of the Nigerian leaders( incumbent and successor) to ending the subsidy regime in the country.
This according to the Economist, can only be addressed if Nigeria elects a ruthless leader next year.
He however said, “Unfortunately, I don’t think it’s going to happen next year and this is not realistic.
He further noted that the challenges in the oil and gas industry will persist until Nigeria deals with the fiscal deficit arising from the lower crude oil production due to pipeline vandalism and crude oil theft.
Bismack emphasised that there has been widespread corruption and abuses across in the upstream, midstream and downstream sectors of the Nigerian oil and gas industry.
He said that petrol subsidy remained economically costly, adding that subsidy is a political decision that can only be removed by a President who has genuine political will to do so.
He said, “Other vital issues in Nigeria’s downstream are acute seasonal petroleum product scarcity, hoarding, smuggling and adulteration.
“Others are industrial actions by the operators and other key stakeholders in the sector, as well as the foreign exchange scarcity.