Subsidy regime has led to increase in budget deficit, caused borrowing setbacks to the economy -IPMAN
Nov. 14, 2022
The Independent Petroleum Marketers Association of Nigeria (IPMAN), says subsidy on Premium Motor Spirit, popularly known as petrol, is no longer sustainable.
Mr. Mike Osatuyi, the National Operations Controller of IPMAN, in an interview with the News Agency of Nigeria (NAN) on Monday in Lagos, condemned payment of subsidy on petrol.
Osatuyi said this against the backdrop of the ongoing hike in the pump price of petrol in filling stations across the country.
He said the federal government had N20.51 trillion expenditure in the 2023 budget against a revenue of N9.7 trillion, leaving a deficit of N10.78 trillion.
Osatuyi said the government hoped to finance subsidy on petrol up to June 2023 at a cost of N3.6 trillion, using Central Bank of Nigeria (CBN) official rate of N435 to a dollar.
“At present, the CBN official rate is hovering around N445 to a dollar which is above the N435 to a dollar projected in the 2023 budget,” he said.
He said the subsidy regime had led to increase in budget deficit and caused borrowing setbacks to the economy.
He also said subsidy had make smuggling of petrol a striving business because of the huge profit involved.
“Subsidy regime does not allow competition, while monopoly is the language of petrol business as the Nigerian National Petroleum Company (NNPC) Ltd. is the sole importer, manager and distributor of petrol.
“Subsidy kills efficiency in the procurement and supply chain of petrol business operations and deprives government of huge revenue,” Osatuyi said.
The marketer said petrol subsidy could have benefitted Nigerians but half of assumed consumption found its way to neighbouring countries.
He noted that Nigeria’s petrol was cheaper at landing cost compared to neighbouring countries.
He urged the government to put all necessary palliatives in place to cushion the negative effects of the imminent increase in price of petrol before removing subsidy.
“Nigeria’s debt servicing of N6.3 trillion per year is not healthy for the country with mere capital expenditure of N5.35 trillion.
“2023 budget projected crude oil production of 1.69 million per day, which is achievable in view of pragmatic measures taken by the government for pipeline surveillance and zero tolerance to crude oil theft,” he said.
Osatuyi said the Group Chief Executive of NNPC, Malam Mele Kyari confirmed that the cost of petrol was around N510 per litre without subsidy.
He added that if CBN made forex available at official rate to the importers at N445 to a dollar, pump price of 510 per litre was achievable.
“As at October 2022 exchange rate of naira to dollar stood at 445 naira against 435 projected in 2023 budget.
He said total deregulation of the downstream sector of the petroleum industry remained the solution to fuel scarcity.
According to IPMAN boss, deregulation remains the answer to all challenges confronting the downstream sector and also allows all the players to key into the sector and import freely.
“Total deregulation remains the best solution to ending fuel scarcity.
“The deregulation of the downstream sector remains the only potent and lasting solution to scarcity.
“But the cost implication of the policy will make the price of petrol too expensive for Nigerians, as deregulation will shift the burden from the government to users of the product,” he said. (NAN)