In September 2021, the Nigerian National Petroleum Corporation (NNPC) revealed that it spent N123.73 billion on petrol subsidies.
In its report to the Federation Account Allocation Committee (FAAC) for the October meeting, the Corporation stated that the amount with the additional N40 billion differed deduction would be deducted from its November contribution to FAAC.
The NNPC also stated that “the gross domestic crude oil and gas revenue for the month of September 2021 was N265, 135,106,526.57.”
NNPC has resorted to direct deduction from FAAC remittance, which it refers to as a “value shortfall” in its books, due to the lack of a provision for petrol subsidy in the 2021 Budget.
Zainab Ahmed, Minister of Finance, Budget, and National Planning, announced on Monday that the federal government would continue to subsidize gasoline consumption until July 2022.
According to him, “the challenge about the PIA is not about the quality of the law but the implementation and so far the government has been very inconsistent in the implementation and they have not really allowed it to work.
“I understand that you cannot have subsidy removal now because the hardship on Nigerians would be immense.
“We have a situation whereby inflation is about 17% and food prices have soared.
“Any attempt to increase petrol price will mean that a litre of petrol will probably sell at N270-N285.
“That would have a knock-on effect on inflation, food basket and on many other things, and on the point, we are in now, we cannot afford that as it might lead to social unrest.
“Our people are very angry because there is poverty in the land”.
Adigun the former head of the British government-funded Facility for Oil Sector Reform (FOSTER) explained that the “government is taking a political decision based on economic factors.
“But the other side of it is saying do we want to spend another N2.9 trillion or thereabout on subsidy in the next few months and in an economy that is already bleeding and we spent 90% of revenue on debt servicing can we afford that?
He pointed out that rather than put a terminal date for petrol subsidy removal, the government should benchmark it on the price of crude oil at the international market.
“It is a very hard decision for the government to take but I think that what will be useful is rather than have a deadline date as set by the Minister, it should be based oil price forecast.
“For us, the optimum forecast for subsidy removal should be around $60 per barrel but as oil is now doing about $85 will it last forever?
“I saw somebody saying it may be $100 per barrel next year and that is really worrying.
“The higher crude oil prices are the higher the burden of subsidy and the higher the impact on Nigerians in terms of economics.”