Lagos Chamber of Commerce and Industry, LCCI, has described fuel subsidy which the World Bank said cost Nigeria N731 billion in 2018, as the biggest fiscal burden currently staring nation’s economy in the face.
LCCI, which response was based on the World Bank report, released on Monday in Abuja focused on key developments in Nigeria’s economy in 2018, added among other things that the Excess Crude Account, ECA, was virtually depleted during the period.
In November 2018, the bank had also stated in another report entitled: ‘Nigeria Bi-annual Economic Update for Fall 2018,’ that petrol subsidy deductions for 2017 full year was N107.3 billion, but its current report showed that N731 billion was spent in 2018 alone.
It had stated that most of the petrol volumes Nigeria spent money to subsidise in 2018 were inflated as daily consumption rose to 54 million litres per day (ml/d) from 40ml/d in 2017, ostensibly due partly to out-smuggling.
But Director General, LCCI, Mr. Muda Yusuf, said: “Perhaps the biggest fiscal burden on the economy today is the petroleum subsidy regime. It is a big hole in the finances of government. It puts tremendous pressure on the foreign reserves and the foreign exchange market, just as it exerts immense stress on the nation’s treasury.
“It remains a cause for concern that the subsidy regime had subsisted, especially at time when the economy is facing unprecedented fiscal challenges; at a time when productivity in the economy is constrained by acute infrastructure deficit; at a time when public institutions are finding it hard to fund their basic obligations. There cannot be a better example of resource misapplication.
“There are two components of this: The first is the genuine subsidy, which is the differential between the pump price and the landing and other costs of fuel. The second [and more disturbing component] is the transparency problems inherent in the fuel subsidy administration, including the petroleum equalisation policy. For several years, the economy suffered severe bleeding from this phenomenon.
“One of the critical elements of the Oil and Gas Sector reform, particularly the downstream sector, is the complete deregulation of the sector. This is the spirit of the Petroleum Industry Bill which, regrettably, has not seen the light of day. The reform of the oil and gas sector would create a number of advantages for the economy.
“It will free resources for investment in critical infrastructures such as power, roads, the rail systems, health sector, education sector etc. The deficit in all of these infrastructure areas is phenomenal. Fixing infrastructure will greatly improve productivity and efficiency in the economy and impact positively on the welfare of the people.
“It will unlock the huge private investment potentials in the downstream oil sector especially in petroleum product refining. This will ultimately reduce importation of petroleum products and ease the pressure on the foreign exchange market as well as the burden on our foreign reserves. It will eliminate the patronage, rent seeking activities and corruption that currently characterise the downstream oil sector. It will create more jobs for the teeming youths of the country in the downstream oil sector as investment in the sector improves.”
However, Mr. Ndu Ughamadu, the Group General Manager, Group Public Affairs Division of the Nigerian National Petroleum Corporation, NNPC, Wednesday, denied that the corporation had inflated or doctored records of its petroleum products importation into the country.
Ughamadu noted that “all the figures of petroleum products it had presented were accurate and can be verified from the Department of Petroleum Resources, DPR, the Petroleum Products Pricing Regulatory Agency, PPPRA, the Nigerian Customs Service and other relevant agencies.
“The NNPC cannot and does not inflate its fuel import figures. The figures can be verified from various government agencies, such as our regulators, the DPR and the PPPRA, as well as the Customs, among others.”
Ughamadu, who noted that he does not have the precise amount deducted for under-recovery for Premium Motor Spirit, PMS, in 2018, explained, however, that the figures cannot also be doctored as it can be verified by the relevant authorities.
