21st June, 2015
President Muhammadu Buhari of Nigeria has been advised to end a fuel subsidy programme and privatise Nigeria’s four refineries in a report by his transition committee, senior sources in his party told Reuters on Sunday.
Africa’s top oil producer and biggest economy heavily subsidises gasoline and relies on imports for the bulk of its domestic demand due to an underperforming refining system.
The subsidy, which was revealed to have paid out more than $6 billion in fraudulent claims in 2012, is proving to be increasingly costly.
Buhari, who was sworn in as president three weeks ago, is considering the recommendations made in the strategy report produced by a 19-member committee formed from his All Progressives Congress (APC) party.
“The removal of the fuel subsidy is one of the recommendations of the transition committee,” said a senior APC source, who did not want to be named.
“The committee also suggested to Mr President that the four refineries be privatised so that the government stops wasting money on annual turnaround maintenance,” he said.
A second APC source also told Reuters that these recommendations were contained in the report given to Buhari earlier this month.
Buhari’s predecessor, Goodluck Jonathan, cut subsidies by 90 percent in the 2015 budget because government revenues have been hit by the slump in oil prices.
Nigeria attempted to end subsidies three years ago, doubling the price of a litre of petrol overnight, in efforts to cut government spending.
The move angered citizens who see cheap pump prices as the only benefit they derive from living in an oil-rich country, and led to eight days of nationwide strikes. The government later reinstated part of the subsidy to end the strikes.
The prospect of the subsidy removal contributed to fuel shortages in the final days of Jonathan’s administration as gasoline importers went on strike saying they were owed money from the government.
Last week, the state-owned Nigerian National Petroleum Corporation (NNPC) said its four oil refineries would resume production in July.
The ailing refinery system generally runs well below capacity, sometimes at just 20 percent, due to neglect and pipeline sabotage.
It would be recalled that the former vice chairman, Senate Committee on Petroleum (upstream) in the 7th Assembly, Senator Kabir Marafa, called for the removal of oil subsidy to end any scarcity of the product in the country.
Marafa (APC Zamfara-Central) also called for the deregulation of the oil sector. He said that the unending subsidy claims were as a result of the non-deregulation of the sector.
According to him, fuel meant for Nigeria is being diverted to other African countries where it sells at a higher price.
“With all sense of responsibility, I think Nigerians need to stand up and say enough of this hypocrisy. This thing called fuel subsidy, I don’t believe there is one, I don’t believe it is benefitting the masses and it doesn’t help them in any way as far as I am concerned.
“So long as fuel is selling at a lower price than some other neighbouring countries, you will continue to have fuel going through the borders out.
“Until they get enough (neighbouring countries), before the local markets become satisfied. If Nigerians want to help this incoming administration and if this incoming administration wants to help I think we need to look at the issue of this subsidy and do away with it once and for all.
“If you deregulate the market, you allow whoever wants to bring petroleum products into the country to go ahead and bring it, you regulate only, fuel will not sell as much as it is selling now.”