The Dillema of Subsidy Payment

-Victoria Opeyemi

Subsidy payment has been an albatross to Nigerian governments as previous administrations have struggled with it and suffocated the country’s economy even international financial agencies like the International Monetary Fund (IMF) has supported its removal.

Petrol subsidy has created a colossal hole in the nation’s revenue. In 2021 1.7 trillion Naira was spent on subsidy. According to the Nigerian National Petroleum Company Limited (NNPCL), oil data between June 2022 to June 2023, 3 trillion Naira was budgeted for subsidy. Former President Muhammadu Buhari came with the idea of removing it. But President Bola Tinubu did it because it was a necessity since the country’s revenues could no longer sustain it.

To put in context, the 2023 national budget is 21.83 trillion naira, with debt servicing that will gulp 60% of projected revenue. This means the continued payment of subsidy will leave the country with almost nothing to run with. From 198 Naira per litre, petrol pump price rose in June 2023 to 630 naira. In July, the Tinubu administration announced that no petrol subsidy policy and it would have been able to save over 1 trillion naira. However, even the 630 naira per litre has not been sustainable, due to fluctuations in the oil markets, and the foreign exchange (forex) markets.

In September, it was revealed that 1. 68 trillion naira has been spent in August to subsidise Premium Motor Spirit (PMS) to keep the price at 630 naira per litre amid raging unrest by organised labour. The money reportedly came from the NNPC shares of NLNG dividend raising questions who actually authorise the payments.

According to the Group Chief Executive Officer of NNPCL, Mallam Mele Kyari, “There is no subsidy whatsoever we’re recovering our full cost from the product that we import. We sell to the market and we understand why the marketers are unable to import. We hope that they do this very quickly and these are some of the interventions that government is doing and there is no subsidy.”

With no budgetary provision and continuous government payments, legal provisions may have been breached. For instance, revenues from investments made on behalf of the Nigerian government are supposed to go into the Federation accounts and can only be spent to appropriation as fund as what is shared with the sub nationals.

According to an analyst, “the reason why we are still paying just N630 per litre is because someone is paying the difference. And there is no other way to describe it apart from subsidy, so you can say is coming back through the backdoor. Definitely, someone is taking care of that differential at this moment.”

Recently, the Nigeria Midstream and Downstream Regulatory Agency (NMDRA), met with oil marketers in the country assuring them of government’s commitment to address some of the challenges of forex and bad roads which the marketers have said are disrupting their businesses.

The National President of the Nigerian Association of Road Transport Owners (NARTO), Alhaji Lawal Yusuf Othman, said, “today if you load from Warri to Oghara, you will have to come all the way to Ibadan before you go to the north, meaning that from Warri to Lokoja the road is bad and this is a very serious development.”

The NNPC GCEO, on October 9 announced that because of the country’s forex crisis only the company can import petrol. While some marketers saw it as attempts at monopoly coming only four months after government had opened the market for all. Therefore, it became clear that the government was not conscious of major price variations if others are allowed to import.

Kyari again buttress his point that: “We as regulators can continue to say the market is open for everyone and we have issued licenses to all those who have had over 90 marketing companies with licences to import PMS and we have given them access to all the required support that they needed in order to ensure there is a constant supply of petrol products in the country.”

Adding her voice to the issue, Chairman of Depot and Petroleum Marketers Association of Nigeria (DAPPMAN), and Managing Director, North-West Petroleum and Gas Company Limited, Mrs. Winifred Akpani, disclosed that “the reality is that affordability is not there. So, if you want to sell N750 per liter, it’s not that easy. People will come and buy N2000, how many litres will that give you, just 3 litres that’s how bad it is.”

Payments of subsidy by successive governments in Nigeria have no doubt rid the country of the necessary growth it thought to have obtained in its 65 years of existence. But where does the country goes from here, the government is now faced with the dilemma of coming clean to openly confirm the  return of fuel subsidy or continue paying it through the backdoor.

The question is crystal clear; is there subsidy and who pays for it?





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