Financial Energy Review
by Musa Ibrahim………,……………..
In a bid to shore- up support for the removal of subsidy the Petroleum Products Pricing Regulatory Agency, (PPPRA) has said that the bulk of the subsidy money was spent in a period of five years between 2011 and 2015 which amount N6.7 trillion about 74.8 percent of the total money so far spent on subsidy
According to PPPRA, N8.9 trillion was spent on fuel subsidy by the Federal Government, mainly by previous administrations, between 2006 and 2015.
.PPPRA gave a breakdown of the money spent onsubsidy as N257.36 billion, N271.51 billion, N630.57 billion, N409.31 billion, and N667.08 billion were spent on fuel subsidy in 2006, 2007, 2008, 2009, and 2010, while in 2011, 2012, 2013, 2014 and 2015, fuel subsidy gulped N2.1 trillion, N1.35 trillion, N1.32 trillion, N1.22 trillion and N653.51 billion.
In his support to removal of subsidy the Minister of State for Petroleum Resources, Chief Timipre Sylva, had also said that the Federal Government was not currently in a position, financially, to pay subsidy, as the COVID-19 pandemic had impacted negatively on the country’s finances.
According to him, since the introduction of the deregulation policy in March 2020, the country had saved about N1 trillion.
He explained that the deregulation of the downstream petroleum sector and the removal of subsidy was not a political decision, but had become inevitable, especially with the effect of the COVID-19 pandemic, the low crude oil prices, and curtailing of Nigeria’s production output by OPEC, which had constrained government’s revenue.
“It became necessary that the country cannot sustain subsidy payments, hence the decision to deregulate. The government has stopped subsidizing petrol at the pump, but will now play its traditional role of protecting consumers from exploitation, by ensuring that marketers do not profiteer at the expense of ordinary Nigerians and consumers of the product.
“We are no longer in the business of fixing prices; we have stepped back and allowed market forces to determine the prices. Henceforth, if crude oil prices go up or down, it would reflect at the pumps.
“This is about the survival of the country and there are certain things the country can afford at this time. We have cut production to 1.412 million barrels, which had halved our earnings” the Minister explained.
According to him the revenue that is currently available to the government had reduced considerably, and has raised the question of where would the government get the money to pay the subsidy.
“It is a necessary policy; we would get over this initial pain, with time, we would get past it” he said.
He further explained that the savings of about N1 trillion since the removal of subsidy come from the removal of the N500 billion earmarked for subsidy payment in the 2020 budget and the removal of foreign exchange differentials, which saved the country around N500 billion also.
To cushion the effect of the removal on Nigerians, Sylva said the Federal Government was fast-tracking the nationwide roll-out of cleaner and cheaper alternative to premium Motor Spirit, PMS, also known as petrol, such as liquefied Petroleum Gas, LPG, and Compressed Natural Gas, CNG.
