Fuel subsidy and refinery revamp cost rise in 5 months
By Jeph Ajobaju, Chief Copy Editor
Fuel subsidy and refinery rehabilitation between January and May cost N1.301 trillion, the Nigerian National Petroleum Company (NNPC) disclosed in its presentation to the Federation Account Allocation Committee (FAAC) in June.
Fuel subsidy alone consumed N1.274 trillion, and refinery rehabilitation cost N9.11 billion each in January, March and April, a total N27.33 billion.
The report shows monthly fuel subsidy as follows:
- January – N210.38 billion
- February – N219.78 billion
- March – N245.77 billion
- April – N271.59 billion
- May – N327.1 billion
The NNPC refers to subsidy as under-recovery/value shortfall, and deducts it every month before making remittance to the FAAC. That has prevented it from remitting any amount to the Federation Account this year.
The NNPC disclosed in its latest presentation that it would deduct N845.15 billion from the amount the FAAC would should share in July.
“The value shortfall on the importation of PMS [petrol] recovered from May 2022 proceeds is N327,065,907,048.06, while the outstanding balance carried forward is N617billion.
“The estimated value shortfall of N845,152,863,012.97 (consisting of arrears of N617billion plus estimated May 2022 value shortfall of N227,721,200,478.23) is to be recovered from June 2022 proceed due for sharing at the July 2022 FAAC meeting,” the NNPC said.
Abuja currently spends N600 to subsidise every litre of petrol consumed in Nigeria, according to figures from oil sector operators.
The NNPC report shows that daily consumption of petrol is 66.8 million litres, and that means subsidy costs about N40.1 billion daily.
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Reaction of experts
Template Design Technical Director Baka Zaka, who kicked against the push for petrol deregulation, argued that one of the remedies to subsidy is ensuring the refineries work, according to The PUNCH.
Former Association of National Accountants of Nigeria (ANAN) President Sam Nzekwe warned that total subsidy removal would not go down well with the masses.
“Subsidy removal should be gradual, but most importantly is the call for our refineries to work so as to halt spending the bulk of our foreign exchange on petroleum products’ imports,” he explained.
Independent Petroleum Marketers Association of Nigeria (IPMAN) Deputy National President Zarma Mustapha also stressed that fixing the refineries is one major way to end huge subsidy.
“If we have refining capacity, the government would have found a way of cushioning the effect of the rise in prices. However, since we don’t have refining capacity and we use the dollar to purchase products abroad, we will have no control over prices.
“This speaks to why it is important for the country to fix its refineries and start refining crude oil locally,” he said.