Despite announcing the total removal of fuel subsidy in May 2023, President Bola Tinubu has continued to spend about N1 trillion to subsidise petroleum products in the country, the Managing Director of Pinnacle Oil and Gas, Robert Dickerman has said.
This amount exceeds what was paid monthly before President Tinubu assumed office in May 2023. Mele Kyari, the Group CEO of the Nigerian National Petroleum Company (NNPC) Limited in February last year said Nigeria was spending over N400 billion monthly on petrol subsidy.
Speaking at Nigeria’s Downstream Forum in the just concluded 2024 Nigeria International Energy Summit in Abuja, Dickerman said the huge amount of money spent to subsidise the products was negatively impacting the budget and potentially fuelling smuggling.
Dickerma’s claim comes three weeks after the International Monetary Fund (IMF) called on President Tinubu to ensure “a complete phase-out” of fuel and electricity subsidies despite the ravaging economic situation in the country.
In a report released on February 9, titled “IMF Executive Board Concludes Post Financing Assessment with Nigeria,” the global lending institution said though 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 noted.
Reiterating IMF’s position, Dickerman said Short-term palliatives “have never resolved long-term issues in any nation at any time in history. We need long-term solutions.”
He noted that Nigeria has a long history of allocating resources to oil and gas production at the expense of most other economic and social programmes.
“To balance this, there has been a long-standing policy to mitigate consumer costs via palliatives such as fuel and food subsidies,” he said.
“I want to point out that there is still a massive subsidy in PMS, albeit in the FX portion of PMS Price, not the global price in dollars.
“The consequences of this subsidy are: The cost of gasoline in Nigeria is the lowest in Africa by far, which encourages smuggling out, further depriving Nigeria of value. Smuggling causes Nigeria to subsidise neighbouring countries even while our economy struggles. The cost is hurting the entire budget, Federal and State, as critical programs cannot be funded to pay this subsidy. It is currently calculated to be about 1 trillion Naira/month.
“Also, with this subsidy in place, ceasing subsidy payments would result in no petrol supply, if there are no refineries producing gasoline. All supplies come from the international market which will only sell at market prices,” Dickerman stated.