Remove petrol subsidy now, presidential economic council advises Buhari

The Federal Government may finally do away with fuel subsidy and allow the market forces to strictly determine the actual pump price of petrol if it bows to pressure within and adopt the recommendation of the Presidential Economic Advisory Council.

Indeed, the council has asked President Muhammadu Buhari to remove subsidy on petrol and adopt a pricing regime that reflects the cost of the commodity.

The council headed by Prof Doyin Salami was set up in 2019 by Buhari to replace the Economic Management Team led by Vice-President Yemi Osinbajo.

The council’s latest advice on petrol subsidy, it was learnt, formed part of its presentation at its sixth regular meeting with the President last Friday, warning that the subsidy regime would worsen solvency of state governments.

According to the document presented at the meeting, the council drew Buhari’s attention to three issues that it said required urgent attention.

They are the need for policy clarity as regards fuel subsidies, which it said would help resolve the dilemma that rising crude oil prices present; the worsening security environment adversely affecting 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 council noted that improving crude oil prices had led to what it called the Nigerian ‘dilemma.’

The dilemma, it said, resulted from the conflicting implications of higher crude oil prices on the nation’s economy.

According to the council, 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 noted that the return of fuel subsidy had created a set of enormous problems for the government and indeed the nation.

It added that as there was no provision for subsidy payments in the 2021 budget, such payments would have to be done by the Nigerian National Petroleum Corporation, thereby reducing revenues accruing to the Federation Account.

This situation, it said, was 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.

The council stated, “As there is no provision for subsidy payments in the 2021 budget, such payments will have to be done by the NNPC thereby further reducing revenues accruing to the Federation  Account.

“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 council added that the subsidy had made investment in Nigeria’s downstream oil sector unattractive.

It stated, “Council advises as follows: 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.”