Tougher Times Ahead As Economic Council Tells Buhari To Remove Petrol Subsidy
BY AMOS DUNIA, ABUJA – If the recommendation of the Presidential Economic Advisory Council is accepted by President Muhammadu Buhari to remove subsidy on petrol and adopt a pricing regime that reflects the cost of the commodity, Nigerians may have to brace up for tougher times ahead.
The Council noted that rising crude oil prices improve public sector revenue and reserves of foreign currency while higher crude oil prices mean that the cost of imported petrol should be higher than the N167/litre being paid at filling stations.
It said that the restoration of subsidies has created a set of significant problems, adding that as there was no provision for subsidy payments in the 2021 budget, such payments would have to be borne by the Nigerian National Petroleum Corporation thereby further reducing revenues accruing to the Federation Account.
The Council further said that the situation is capable of worsening the solvency of many state governments and could take the country back to 2015 when the Federal Government had to provide ‘bailout’ funding to the states.
According to the Economic Council; “The solvency of many state governments will worsen – this could take us back to 2015 when the Federal Government had to provide ‘bailout’ funding to the states.”
The removal of petrol subsidy formed part of the Council’s deliberation at its sixth regular meeting with President Buhari last week Friday, during the Salami-led Council stressed that restoration of subsidy made investment in Nigeria’s downstream oil sector unattractive.
It drew the attention of the President to three key issues which it recommended required urgent attention which include; “The need for policy clarity with regard to fuel subsidies which would help resolve the dilemma which rising crude oil prices present; the worsening security environment which has adversely affected food production leading to higher prices; and the need for the Petroleum Industry Bill to encourage investment in Nigeria’s oil and gas sector”.
The Economic Council also said that improving crude oil prices had led to what it called the Nigerian ‘dilemma, adding that the dilemma resulted from the conflicting implications of higher crude oil prices on the nation’s economy.
Part of the document submitted to President Buhari states; “There is an urgent need for clarity and consistency in petrol pricing policy. Subsidy on petrol be removed and a pricing regime which reflects the cost of petrol adopted.
“It is noteworthy that with the exception of petrol, the prices of all other petroleum products have been deregulated; the cost of retaining the subsidy outweighs the benefits, or that the benefits of removing the subsidy are far greater than the costs.
“Data published by the National Bureau of Statistics also show that petrol prices are not the same across Nigeria. In March 2021, petrol prices range between N162.17 and N200.87/litre –the highest being in Lagos State whilst the lowest prices are obtained in Adamawa State.
“Council is especially concerned that in addition to further worsening government revenue, re-introduction of subsidies will jeopardise investment in the oil sector and also create uncertainty about general government policy on pricing.”
The economic Council also noted that there is a consensus on the worsening security situation in Nigeria, just as it listed the sources of security challenges to include Boko Haram and ethno-religious conflicts; political violence; economic and resource-based violence; organised violent groups; and herders/farmers /settlers clashes.
It specifically said that violence had so much impact on human capital and on poverty and vulnerability just as physical capital and infrastructure are often damaged; while business and investment suffer.
President Buhari had in 2019 set up the Economic Council chaired by Prof Doyin Salami and charged with the responsibility of advising the President on economic policy matters including fiscal analysis, economic growth and a range of internal and global economic issues working with the relevant cabinet members and heads of monetary and fiscal agencies, reports directly to Buhari.
The Prof Salami-le Council replaced the defunct Economic Management Team that was headed by Vice-President Yemi Osinbajo.
