The cost of fuel imported into the country is so huge that government can no longer sustain it.
Nigeria may collapse as a nation in the event that the Federal Government fails to put an end to subsidy on imported petroleum products in July this year, the Managing Director, Petrocam Nigeria Limited, Mr. Patrick Ilo, has said.
This is coming on the heels of plans by the government to finally cancel subsidy, which reached a two-year peak of N220.11 billion in November last year.
The subsidy removal will automatically ensure that the sector embarks on full deregulation downstream of the nation’s oil and gas industry.
The amount for November brings the total payment on subsidy for the 11months of 2021 to N1.5 trillion. In an interview recently, Ilo said that the planned removal of fuel subsidy by the government was in the right direction, adding that the cost of fuel imported into the country was so huge that government can no longer sustain it.
According to him, the country faces extinction if the government continues to pay subsidies on fuel beyond this year. On deregulation, Ilo said that the decision by the government to completely deregulate the downstream sub-sector of the nation’s energy industry was a welcome development, adding that the idea would lead to the emergence of much bigger companies in that segment of the industry. He said: “I do not foresee mergers and acquisition in the downstream segment of the sector. What I can say is that bigger and stronger operators would come up following the decision to fully deregulate the downstream in the years ahead. Some operators might decide to walk away and, in the process, sell their outlets to bigger companies in the industry.”
Multinational oil companies, Ilo said, might want t leave the downstream sub-sector and sell off their stations to other operators. Ilo said that a period was coming in the sub-sector in which only the bigger firms would be able to play well.
He noted that Ardova Energy firm completed a full buyout of a rival Enyo Retail and Supply Limited within a short period, stressing that more of such issues may come up after full deregulation of the industry.
Recall that members of the organized private sector of Nigeria (OPSN) had also backed the removal, saying if fuel subsidy is removed, funds that would be saved could address wide infrastructural deficits and other gaps in the country.
OPSN Chairman, Taiwo Adeniyi, said in Lagos, that although there were proponents and opponents, it was indisputable that the fuel subsidy regime is fraught with corruption, benefitting a few petroleum importers. He described the payment as a huge leakage on the nation’s revenue portfolio.
According to him, “there is the need to address this urgently and free up funds for development. Nigerians should not suffer for a product their nation is endowed with and neither should they suffer for inefficiencies in government,” he said. Adeniyi noted further that while it is desirable to remove subsidies, it is also important for the government to address socioeconomic issues that would arise.
He said: “While we support the removal of the fuel subsidy, we urge that government should, first, as a matter of boosting Nigerians and other stakeholders’ confidence and demonstrating its goodwill, address the following as a prerequisite to total removal of the subsidy.”
Subsidies were first introduced in Nigeria in the 1970s, as a response to the oil shock of 1973. Years after, the country resumed the importation of fuel, following the inability of the four state-owned refineries to produce enough fuel for domestic consumption.