It is alarming to note that Nigeria has spent more than N13 trillion or $74 billion on fuel subsidies in 16 years, which is between 2005 and 2021.
Orji Ogbomaya Orji, the Executive Secretary, Nigeria Extractive Industries Transparency Initiative (NEITI), stated this at a policy dialogue on oil swap in Abuja and said that the removal of fuel subsidy and complete deregulation of the petroleum sector that will put an end to oil swaps, have also failed.
Adding a budgeted N6trn spending on petrol subsidy between 2022 and June 2023 to the N13tr fuel subsidies cost, the amount would have reached N19trn in about 17 years.
From NEITI’s recent policy brief on subsidy, Orji said, Nigeria has spent over N13trn 1$74bn) on fuel subsidies between 2005 and 2021.
The figure in relative terms is similar to Nigeria’s total budget for health, education, agriculture, and defence in the last five years, and almost the capital expenditure for 10 years between 2011 2020.
Despite this spending, the NEITI head confirmed that Nigeria continues to suffer inefficient supply arrangements-scarcity and its attendant fuel queues.
Orji pointed out that Nigeria lost another N16.25 trillion ($46.16 billion) in 12 years (from 2009 to 2020) due to theft from 6197 million barrels of crude oil while the nation was bleeding through subsidies. According to him, the amount of crude oil lost daily amounts to more than 140,000 barrels. Orji claimed that several oil swap deals, including the January 2016-launched Direct Sale Direct Purchase (DSDP), had failed. Tijah Bolton Ak-pan, the Executive Director of Policy Alert, urged NNPC and other organizations to play a bigger role in transparency, noting that NNPC Ltd. has stopped disclosing data.
However, Executive Director at VNPC Trading Limited Maryamu Idris, who spoke on behalf of the CEO of NNPC Ltd, defended the company’s open actions by saying, “We have shared all the information that needs to be shared; our processes, and we are very excited to be here.”
The CEO of the Corporate Affairs Commission (CAC), the Registrar General, Alhaji Garba Abubakar, the Beneficial Ownership (BO) portal will go live in May; businesses registered after 2020 will be required to disclose real owners, while those registered earlier will be required to do so whenever they file their annual returns.
Gbenga Komolafe, the chief executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), announced the launch of a beneficial ownership register portal to require shareholders in all exploration companies with 5% or more of the voting stock to disclose their identities.
Recall that in 2020, the Federal Government had spent over N10 trillion on subsidy in at least 12 years. This was at the expense of the overall wellbeing of the people.
Analysis of the opportunity cost of the subsidy spending far outweighed the direct benefits.
Petroleum contributes seriously to the economy of Nigeria and benefits generated are gradually reducing due to the amount paid on subsidy.
Moreover, the subsidy regime is further helping the vicious circle of poverty in the country.
The main goal of subsidies is to keep the prices of fuel low in order to enhance the low cost of living.
However, there has been an increase in petroleum price volatility.
Additionally, it encourages the illegal export of fuel that has received subsidies, which raises the cost of subsidies to the economy.
For instance, the Federal Government spent nearly 10 trillion naira (9.84 trillion) to subsidize imported petroleum products between 2006 and 2018.
These funds were either deducted from the government’s revenue fund or came from the deficit budget.
Overall, the funds come at a high opportunity cost to Nigerians’ rightful infrastructure development.
Source: TheStreetJournal | Read More
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