Fuel subsidy

…queries huge expenditure on moribund refineries

…warns of difficulty in mobilising revenue, subsidy payment

By Michael Eboh

The Federal Government has revealed that it spent N1.5 trillion on fuel subsidy in 2019.

Senior Special Assistant to the President on Niger Delta Affairs, Senator Ita Enang, disclosed this in a communiqué in Abuja.

The communiqué was issued after a consultative meeting between a Federal Government team led by the Office of the Senior Special Assistant to the President on Niger Delta Affairs and the Association of Artisanal Local Refineries Operators in Nigeria.

The meeting, held March 15, had in attendance Senator Ita Enang; Mallam Mele Kyari, Group Managing Director of the Nigerian National Petroleum Corporation, NNPC; Acting Managing Director of the Niger Delta Development Commission, NDDC, Professor Daniel Pondei and the Director General/Chief Executive Officer of the National Oil Spill Detection Response Agency, NOSDRA, Mr. Idris Musa.

Others are representatives from the Nigerian Extractive Industries Transparency Initiative, NEITI, and the Petroleum Technology Development Fund, PTDF, and Mr. Godwin Sunday, Chairman of the Association of Artisanal Local Refineries Operators in Nigeria.

Enang disclosed that the amount incurred as subsidy was as a result of the fact that the commodity was imported at points where the landing cost were higher than the regulated price of the commodity in Nigeria.

Difficulty in mobilising revenue, fuel subsidy payment

He, however, warned that with the current crash in the prices of crude oil in the international market, the Federal Government would be faced with dwindling revenue from crude oil sales and other barter arrangements, which would make it impossible for the country to sustain the current subsidy regime.

According to him, “whereas the price of crude oil has drastically dropped to the twenties dollar per barrel and there will be great cost differentials if we still ship very cheap crude abroad, pay export shipping cost and incidentals, get them refined abroad and ship back to Nigeria, paying another shipping and landing, agencies and incidental cost, including fuel subsidy;

“Whereas with the crashed cheap price of crude oil, Nigeria will not have enough revenue from crude sales or any batter arrangement to sustain the subsidy regime currently operating.

“Whereas the import of refined petroleum products, indeed PMS in particular has more cost element of marine transportation, Nigeria Ports Authority, NPA, charge for export/import handling, Nigeria Maritime Administration and Safety Agency, NIMASA, charges, and indeed other charges relating to in and maritime transportation.”

Expenditure on moribund refineries

Enang bemoaned the current state of the country’s refineries, especially the losses posted by the facilities and the huge amount the NNPC continue to expend on the refineries.

He said “Whereas, if the mega-refineries were not even in operation, Nigeria would have been saved the losses which come from other revenues of the federation.

“Whereas experts have asserted that so long as import and subsidy operates, our mega-refineries may never work as it is more profitable for operators to import, gaining from subsidy paid.”

ALSO READ: There is insufficient funds for national development -DG BPP

The aide of the President further warned of an impending challenge in fuel supply in Nigeria, stating that “most of the countries from whom we import refined products are health/pandemic challenged and they have shut or scaled-down operations.

“And even the vessel carrying the import may come with pandemic challenged crew members which may further complicate our domestic health problems.

“And whereas it is more profitable and economically viable to diversify and build our local refining capacity, as we do not even have enough market for our export crude to yield revenue for us to sustain import at this level.”

To cushion these challenges in the short to medium term, participants at the consultative meeting, according to Enang, agreed that subject to technical appraisal of each artisanal facility and upgrading to guarantee safety, technical quality of products, namely, petrol, diesel, kerosene and other products, as well as environmental standards and protection, the Federal Government through the NNPC and other agencies shall co-operate and support the integration and operations of artisanal refineries.

Enang further stated that the Federal Government had directed operators of artisanal refineries to coordinate themselves into co-operatives or business units, merge their operations and have a maximum of three sites per state where the NNPC may inspect, and proceed to support and encourage for the purpose of allocating products for refining.


Subscribe to our youtube channel


Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.