Nigeria cannot exit subsidy on Petroleum now, GMD, NNPC
The Group Managing Director, Nigeria National Petroleum Corporation, NNPC Mele Kyari has said that the government cannot remove subsidy on petrol (premium motor spirit, PMS) in the nearest future.
Kyari was speaking at a Joint Senate Committees on Finance, National Planning, Foreign and Local Debts, Banking, Insurance and other Financial Institutions, Petroleum Resources (Upstream), Down Stream Petroleum Sector; and Gas on the 2022 – 2024 Medium-Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) in Abuja.
He disclosed that the landing cost of petrol in Nigeria is N250 per litre while the pump price is N162 per litre.
He further stated that there are consultations in government to take subsidy out of revenue framework, but provision has been made for subsidy in 2022 budget because “we are not sure we can conclude the ongoing consultations before then”.
He added that the daily oil consumption of 60 million litres of PMS is not the actual consumption of Nigeria, as there are disruption any time there is short fall in supply.
Kyari also noted that smuggling is part of the problem, because once there is difference between pump price and what obtains in other jurisdictions, it will be difficult to control it.
“When we sell N162 per litre and it is sold at N500 elsewhere, the incentive to smuggle will be there”, adding, that is why you see Nigerian PMS in neighbouring countries.
“The difference between the landing cost of petrol and the pump price, is what necessitates the subsidy or what.
“On the 57 dollars per barrel oil benchmark, as based oil price scenario in the Medium Term is (2022:$57/bbl, 2023 $61/bbl, 2024:$62/bbl) and this considering the 3 Year Historical Dated Brent Oil Price average of $59.07/bbl premised on Platts Spot Prices”.
“The provision for subsidy in the 2022 budget is the responsibility of the Federal Government in consultation with the states and local governments through the MTEF and FSP.
“In line with the Fiscal Responsibility Act 2007 (as amended), and based on the funding requirement, a projected appropriation coverage of N1.352 trillion is required for Federal Government – funded strategic project under the supervision of NNPC for the fiscal year 2022” Kyari said.
