The country’s expenditure on subsidies has now hit N6 trillion because of the price of crude oil which has remained above $100 per barrel.
This was the view of a panel of discussants that participated at the Centre for Petroleum Information (CPI) Oil & Gas Law Forum, titled “Implementing Petroleum Industry Act (PIA) 2021: Fixing arising legal issues.”
According to the speakers at the forum, the price of crude oil was between $55-$60 per barrel when the government raised the budgeted to N4 trillion. But now the price is over $100 per barrel.
The amount spent on subsidies between 2010 and 2020 was N1.4 trillion. The cost increased substantially in 2021 and in 2022 it has gone beyond one’s imagination.
Giving a five-year breakdown of the subsidy trajectory, Emeka Akabogu, one of the speakers at the forum, said the cost of fuel subsidy has increased by 890 percent between 2017 and 2021 with only 12 percent increase in the price of fuel.
Emeka Akabogu lamented that by paying subsidy the government has violated the petroleum Industry Act which it put in place. This situation, he opined, could bring about integrity challenges in respect of government policies, because investors’ confidence is being eroded.
He asked, what does removal of fuel subsidy entail? He answered by saying that it means the market is deregulated and that there is much more revenue for the government to divert to areas of need. It also means that operations or investment in the industry with regards to retail stations, storage tanks distribution net and haulage and the likes will increase significantly, with efficiency at its best. This was what was envisaged with the passage of the PIA, he said.
“The government had said it was going remove subsidy by the middle of the year. But at the beginning of the year the price of crude oil went up, and with election year in sight, the government obviously capitulated to the sentiment that is being expressed by the general public and decided that it would continue with fuel subsidy.”
The PIA he said was unequivocal regarding the deregulations of pricing of petroleum products in Nigeria because the Act stated that the prices of petroleum products shall be based on market price or forces of demand and supply.
He said the federal government is breaking the law by its continuous payment of subsidy, adding that the PIA is enforced but essentially the free market regime is not in force.
He said the opportunities in implementing the PIA are huge and better than trying to maintain it at the expense of other sectors of the public service
Removal of subsidy he said, gives the operators more control over their profit, allowing them to set cost-reflective prices for their products, he said.
He added that the sovereign sanctity of the PIA is being eroded by the government’s refusal to allow full deregulation of the downstream sector of the petroleum industry.