Many people believe the Nigerian government is about to make another economic blunder with the reintroduction of Petroleum Support Fund, widely known as fuel subsidy, barely five months after announcing the scrapping of the scheme.
In a template from the Petroleum Product Pricing Regulatory Agency (PPPRA) on Monday May 2, the government said it would pay subsidy on Petrol from recoveries from N10 billion made in the first quarter of 2016 realised from the sales of the product above the expected open market price.
The PPPRA said based on the current price of N86 per litre at the Nigerian National Petroleum Corporation, (NNPC) retail outlets, the federal government was paying N12.62 per litre as subsidy on the product and N12.88 per litre as subsidy for other oil marketers’ price of N86.50.
According to the agency, the expected open market price of the product had risen to N99.38 per litre for independent and major oil marketers and N98.62 per litre for NNPC retail outlets, while saying that the expected open market price was the actual price of the product without subsidy and it was based on the current exchange rate of N197 to a dollar.
According to the template, the landing cost of PMS imported into the country was N84.32 and N85.08 per litre for NNPC retail outlets and independent and major oil marketers while the distribution margin, which include retailers, transportation, bridging fund and dealers margin among others is put at N14.30, bringing the current expected open market price to N98.62 and N99.38 for both government and private retailers.
Those who call for the scrapping of the subsidy hinged their call on fraud associated with it, with many saying that deals had been shrouded in secrecy resulting in huge capital flight.
For example, the national leader of the All Progressives Congress (APC) Bola Ahmed Tinubu while urging the APC-led government to remove subsidy on the product said: I have reached the conclusion that there are too many demons in the system for this hell to be converted into good earth let alone heaven,” adding, “I would choose to remove the subsidy and use the money to help people – let us feed our school children, with our local produce promote agriculture, create jobs and start erecting a social safety net for the vulnerable among us in true need”.
Acknowledging that government expenditure on subsidy payment had been wastefully large, Kachikwu told Senate/House of Reps joint committee on the Medium Term Expenditure Framework last year that over N1 trillion was paid as subsidy in 2015 alone. He said, “The current pricing work we are doing had shown that there shouldn’t really be subsidy. The government doesn’t need to subsidise,”,
The reintroduction of subsidy on the petroleum product is a vindication of those who accuse the government of policy summersault and, a signal that the President Buhari-led government does not have clear economic roadmap to revamping the oil and gas industry, and by extension, the entire economy.