Petrol subsidy must end now or solvency of many states will worsen – Presidential Economic Advisory Council tells Buhari

President Muhammadu Buhari addresses Nigerians on COVID-19

The Presidential Economic Advisory Council has asked President Muhammadu Buhari to remove fuel subsidy on petrol and adopt a pricing regime that reflects the cost of the commodity.

The Prof. Doyin Salami led council gave the recommendation when it met with the president on Friday.

The council noted that there are three issues that required urgent attention. They include; the need for policy clarity with regards to fuel subsidies which according to the council would help solve the dilemma which rising crude oil prices present; the worsening security environment which had 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.

It further noted that subsidies created a set of significant problems. It added that there was no provision for subsidy payments in the 2021 budget and such payments would have to be done by the Nigerian National Petroleum Corporation (NNPC) thereby reducing revenues accruing to the Federation Account.

“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 document reads below in parts;
“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.

“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.”

On insecurity in the council advised the FG to; “Defeat Boko Haram decisively, as a decisive defeat is necessary to permanently keep the insurgency at bay.

“There is need to review strategy as to the way forward, examining all options -including seeking the assistance of external powers.

“Improve the implementation of policies aimed at improving access and quality of education in underserved areas.

“Implement existing law on compulsory attendance of primary school to reduce the number of out of school children, a key recruiting ground for thugs.

“Resolve grievances around exclusion from access to power, opportunity, and representation through dialogue.

“To be effective, government should involve civil society, the private sector, regional and international organisations focused on peace and conflict resolution in roundtable discussions aimed at resolution of grievances.”

On the Petroleum Industry Bill, the council said; “The importance of this bill to the national economy cannot be overstated.

“When enacted, this law will have a profound effect beyond the oil and gas sector.

“Potentially, this bill could provide a basis for building and industrial economy for Nigeria.

“Implementation of the Paris Agreement has seen a continuous global transition away from fossil fuels towards renewables as primary energy source.

“The PIB will join the National Petroleum Policy and the National Gas policy in defining the environment for investment in the oil and gas sector and also influence sentiment around Nigeria as an investment destination.”

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