Managing Director of Pinnacle Oil, Robert Dickerman, has revealed that the President Bola Tinubu-led administration still spends about N1trillion on petrol subsidies monthly.
Dickerman made the startling revelation while participating in a panel discussion at session six of Nigeria’s Downstream Forum, which took place at the recently-concluded Nigeria International Energy Summit, (NIES), in Abuja.
According to him, the subsidy payment was impacting on the Budget and potentially fuelling smuggling due to the country’s low gasoline prices.
Despite President Bola Tinubus announcement of total deregulation of petroleum products, Nigeria is still shelling out a whopping one trillion naira every month for petrol subsidies.
According to Dickerman, foreign investors and lenders, as well as government-run DFIs, have been clear about their expectations for Nigeria. They are looking for a conservative fiscal policy, a crackdown on corruption, competitive markets, and fair enforcement of contracts.
However, the ongoing petrol subsidy is a major roadblock to achieving these goals.
Recall that on February 12 that the International Monetary Fund (IMF) called on President Bola Tinubu to ensure a complete phase out of fuel and electricity subsidies despite the ravaging economic situation in the country.
The global lending institution, which made the recommendation in a report released on February 9, titled: IMF Executive Board Concludes Post Financing Assessment with Nigeria, revealed that though the President Tinubu announced the removal of fuel subsidy on May 29, the administration has “capped retail fuel and electricity prices – thus partially reversing the fuel subsidy removal”.
Fuel and electricity subsidies are costly, do not reach those that most need Government support, and should be phased out completely, IMF, however recommended.
Corroborating the IMF report, the Pinnacle Oil MD stated that a significant subsidy was still in place, contributing to the product’s affordable price and potentially fuelling smuggling activities to nearby nations.
He said, Nigeria has a long history of allocating resources to oil and gas production at the expense of most other economic and social programmes”. According to him, “To balance this, there has been a long-standing policy to mitigate consumer costs via palliatives such as fuel and food subsidies.
Dickerman, however, noted that there “is no competition in bulk supply”, adding that only the Nigerian National Petroleum Company Limited (NNPCL), which is owned by the Government, can import.
Wholesale and retail prices are set based on their subsidised cost, and they determine who gets supply. Without a competitive market, foreign investors are discouraged from investing in this sector in Nigeria, he stated.
The solution to this problem seems obvious, even acknowledging the daily struggles most citizens and companies have today with reduced purchasing power, high inflation, high-interest costs and high unemployment that exists today. Short-term palliatives have never resolved long-term issues in any nation at any time in history. We need long-term solutions, he further stated.
