THE Nigerian National Petroleum Corporation (NNPC) has revealed that it spent N123.73 billion on petrol subsidy in September 2021.
The Corporation in its report to the Federation Account Allocation Committee (FAAC) for October meeting said the amount with additional N40 billion differed deduction would be deducted from its contribution to FAAC in November.
NNPC also reported that “the sum of N265, 135,106,526.57 was the Gross Domestic Crude Oil and Gas revenue for the month of September, 2021”.
With no provision for petrol subsidy in 2021 Budget, NNPC has resorted to direct deduction from FAAC remittance, which it terms ‘value shortfall’ in its books.
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed had on Monday disclosed that Federal Government would continue to subsidise petrol consumption till July 2022.
So far the government has spent about N800 billion as petrol subsidy in the first eight months of 2021. The start of the implementation of the Petrol Industry Act 2021 which prescribes full deregulation of the downstream sector of the petroleum industry had led to expectation that subsidy on petrol would be ended by the government.
Speaking in a telephone interview, Independent Oil and Gas Governance Consultant, Mr. Henry Adigun noted that rising food prices has placed the government in a difficult position concerning petrol subsidy removal.
According to him, “the challenge about the PIA is not about the quality of the law but the implementation and so far the government has been very inconsistent in the implementation and they have not really allowed it to work.
“I understand that you cannot have subsidy removal now because the hardship on Nigerians would be immense. We have a situation whereby inflation is about 17 percent and food prices have soared. Any attempt to increase petrol price will mean that a litre of petrol will probably sell at N270-N285.
“That would have knock-on effect on inflation, food basket and on many other things, and on the point we are in now, we cannot afford that as it might lead to social unrest. Our people are very angry because there is poverty in the land”.
Mr. Adigun the former head of the British government funded Facility for Oil Sector Reform (FOSTER) explained that the “government is taking a political decision based on economic factors. But the other side of it is saying do we want to spend another N2.9 trillion or thereabout on subsidy in the next few months and in an economic that is already bleeding and we spending 90 percent of revenue on debt servicing can we afford that?
He pointed out that rather than put a terminal date for petrol subsidy removal, the government should benchmark it on the price of crude oil at the international market.
“It is a very hard decision for the government to take but I think that what will be useful is rather than have a deadline date as set by the Minister, it should be based oil price forecast.
“For us, the optimum forecast for subsidy removal should be around $60 per barrel but as oil is now doing about $85 will it last forever? I saw somebody saying it may be $100 per barrel next year and that is really worrying. The higher crude oil prices are the higher the burden of subsidy and the higher the impact on Nigerians in terms of economics.”