Nigeria loses $2.5 billion to inability to meet 1.8 million oil barrels per day.
In December, 2022, there was an increase in production of crude oil in Nigeria by 4.2 percent to 1.23 million barrels per day, regardless of this increase, Nigeria Employers’ Consultative Association (NECA), asserted that there is still shortage of production. According to the Director General of NECA, Adewale-Smatt Oyerinde, shortage of 0.57 million barrels per day has been resulting to monthly loss of $2.5 billion for the country. Reduction in the government’s revenue is also as a result of the worsened state of oil theft and unsustainable subsidy on petroleum products.
Oyerinde urged the incoming government to reveal the political will for implementation of policies that will return the economy back to the path of growth. He added that all leakages – oil thefts, skewed concessions, fuel subsidy, and others – in the government’s revenue has to be blocked. There should also be an initiation of a full review of the tax administration to make it investor-friendly and for equitability. It was also said that Nigeria should not continue to charge high tax rates on businesses and citizens while governments in other countries were reducing tax rates for enhancement of economic activities, attraction of investors and promotion of sustainable consumption.
Association says Nigeria suffers misplacement of economic priorities.
NECA DG added that the incoming government initiates strategies for diversification of the revenue base by reviving lagging non-oil sectors of the country as the country currently has N77 trillion debt with no visible impact on infrastructural development. The situation of the country is as a result of misplaced priorities as revealed over the last decade. The country spent about N10 trillion on fuel subsidy, over N15 trillion on Capital Expenditure, about N2.5 trillion on Health and N3.9 trillion on Education. The aforementioned allocation of funds has shown that critical developmental sectors – health, education and infrastructure – are suffering from misplacement of economic priorities.
Chief Ukadike Chinedu, the National Public Relations Officer of the Independent Petroleum Marketers Association of Nigeria (IPMAN), said that the fuel supply of the country is worsened by subsidy and fuel importation. He stated that the exchange rate also affects importation of petroleum products which is the reason why petroleum products are expensive. Refining petroleum in the country and ensuring functionality of the depots are likely solutions to the current situation. He added that it is expected that when an administration is leaving office, scarcity of products is usually apparent.
Economy will improve if costs of petroleum products are market driven.
The Minister of State for Petroleum Resources, Chief Timipre Sylva, in his speech at the scorecard series (2015-2023) of the President Muhammadu Buhari-led administration in Abuja, stated that investors would keep shunning investment in Nigeria’s downstream oil sector owing to the fact that the costs of petroleum products were not market driven until the end of the regime of subsidy in the country. He expressed his concerns over the continuous operation of petrol subsidy regime by the government and declared that it should be discarded.
Sylva suggested possibilities of investors to invest in a country with subsidized regime and asserted that refinery would not be profitable in the same period of subsidy. With a market driven condition in the downstream oil sector, there will be an improvement in the economy as investors would like to invest. Also, with the creation of more refineries in the country, there will be an end to difficulty in accessibility of petroleum products. Even the Nigerian National Petroleum Company Limited (NNPC) has been selling fuel without profit due to PMS subsidy.
Petrol subsidy is no longer sustainable in the country.
Zainab Ahmed, the Minister of Finance, Budget and National Planning, affirmed that the federal government had set aside a budget of N3.6 trillion for petrol subsidy till June 2023. Resultantly, oil marketers asserted that the problem of supply in the downstream oil sector, which leads to fuel scarcity most times, is likely to persist till June. According to Sylva, the cost of petroleum products in Nigeria was less than what was gained in other countries, but he stated that the current national consensus emphasized the unsustainability on petrol subsidy.
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