Despite the recently signed Petroleum Industry Act (PIA) and the federal government’s plan to deregulate the downstream sector, the subsidy regime will likely continue in 2022, an official has said.

The federal government is already making provision for the controversial petrol subsidy as part of its expenditure in the 2022 budget, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, has said.

The federal government is projecting N900 billion for fuel subsidy for 2022.

Mr Kyari spoke on Thursday at MTEF/FSP hearing organised by the Senate Committee on Finance in Abuja.

This revelation comes amidst unresolved issues between the federal government and the organised labour on the implementation of the full deregulation of the downstream sector of the oil industry.

The government had in March 2020, announced an end to the fuel subsidy regime and the immediate deregulation of the downstream sector of the petroleum industry amid a global oil price crash. The process was later suspended earlier this year to allow for consultation with stakeholders and organised labour.

PREMIUM TIMES had reported how the nation may be expending over N102.5 billion monthly to reduce the retail cost of petrol – a sum higher than the N70 billion budgeted for the provision of Universal Basic Education (UBEC) in the 2021 budget, as well as the N45.19 billion allocated for immunisation.

In its defence, the federal government had said there was need “to be considerate to Nigerians and implement structures to help reduce the price of petrol, hence the subsidy.”

It also comes despite promises made by the State Minister for Petroleum, Timipre Sylvia, that petrol subsidy will be removed after the Petroleum Industry Bill (now an Act) is signed.

President Muhammadu Buhari signed the PIA two weeks ago.

While many Nigerians have called for the removal of subsidy in order to enable the government to invest the fund in other developmental projects, others have condemned such calls, citing it as perhaps one of the few “benefits” the masses enjoy from the government. And also because it is not included in the annual budget.

Some groups, including the Nigeria Labour Congress and Trade Union Congress, have advised the government to fix the refineries before removing fuel subsidy.



New plan

Mr Kyari told lawmakers that although no provision was made for fuel subsidy in 2021, “the government had begun a conversation with relevant stakeholders to exit the subsidy regime and the process may not be concluded anytime soon, hence the need to reintroduce subsidy in the 2022 budget.”

With this revelation, it is unclear how the NNPC intends to solve issues of unremitted revenue

The agency had in April, blamed its non-remittance on costs incurred from subsidy payments on petrol.

‘‘There is an ongoing process that is engaging members of the organised labour, civil society organisations and many other institutions of government and other critical stakeholders to arrive at a landing on how and when we can exit the subsidy regime to be very precise.

“The government is not sure that it can conclude the process of exiting the subsidy regime before the end of 2021 or early 2022, hence the provision of fuel subsidy in the 2022 Appropriation bill,” he said.

Mr Kyari further said the NNPC pays between N100 and 120 billion monthly to keep the pump price of petrol at N162 per litre and that the agency is sustaining imports to avert scarcity.

PREMIUM TIMES reported how the NNPC boss blamed the agency’s non-remittance of revenue on smuggling, round-tripping and other sharp practices.

The lawmakers, however, issued stern warnings about revenue generation which they said, will curb the habit of borrowing to fund the budget.

The Medium Term Expenditure Framework (MTEF) sets parameters with which the budget is prepared, including the borrowing plan of the government.

It proposes $57 per barrel as crude price for 2022, $61 per barrel for 2023 and $62 per barrel for 2024 predicated on a base national production of 1.883 million barrels per day in 2022, 2.234 million barrels per day in 2023 and 2.218 million barrels per day in 2024.

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