October 16, 2023

‘Return’ of petrol subsidy

‘Return’ of petrol subsidy

THE Federal Government has continued to dispel the widespread insinuations that it has reverted to payment of subsidy on Premium Motor Spirits, PMS. 

However, some stakeholders in the industry have voiced their concern that the subsidy that President Bola Tinubu had declared as “gone” during his inauguration on May 29, 2023 is indeed back.

In particular, the Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, National President, Festus Usifo, claimed in a recent television interview that government had to resume subsidy payments to prevent the further increase in the pump price of petrol which is already beyond the reach of the common people.

Usifo said that the increase is as a result of the continued rise of crude oil prices and massive naira depreciation. For instance, as at May 29, 2023 when Tinubu was sworn in, the average daily price of crude oil was $75.47 per barrel for our Brent Crude. But currently, the cost is close to the $90 per barrels level. 

And with the Israeli-Hamas war in the Middle East which promises to involve more countries, crude oil price is likely to further increase.

If indeed the Federal Government has resumed paying petrol subsidy, it is just another indicator of policy failure. The Muhammadu Buhari regime on two different occasions, claimed to have removed petrol subsidy but ended up paying even more heavily on it than before. 

For instance, in July 2016, Buhari jerked the pump price of petrol from N87 to N145 per litre in the guise of subsidy removal. It was later moved to N160 per litre and finally to N180 before he left office earlier this year.

Buhari also provided funds for subsidy payments till the end of June this year to push through the “final” subsidy removal.  But Tinubu started its implementation a month ahead, thus causing petrol price to triple or even quadruple in some places.

All these failures are because the necessary preparations have not been made for a successful and relatively painless implementation of subsidy removal. 

Organised Labour and well-meaning Nigerians have always argued that Nigeria must first regain its domestic refining capacity before total subsidy removal can work. In addition to that, production of petroleum products must be subsidised through special concessionary allocation of crude to all refineries for domestic consumption.

As long as we continue to import refined petroleum products, we can never stop paying subsidies because we have no control over prices. The speedy completion of all refineries, including the private ones, should be seen as a matter of strategic national economic interest.

Unless we bring these refineries on stream, provide subsidised crude to them for domestic use and ensure the supply of crude to all refineries without discrimination,  government and the people will continue to suffer.