Remove Petrol Subsidy, Economic Council Urges Buhari, Cautions
States
The Presidential Economic
Advisory Council has asked President Muhammadu Buhari to remove subsidy on
petrol and adopt a pricing regime that reflects the cost of the commodity.
Buhari had in 2019 set up the council
chaired by Prof Doyin Salami to replace the regime’s defunct Economic
Management Team led by Vice-President Yemi Osinbajo.
The council, charged with the
responsibility of advising the President on economic policy matters including
fiscal analysis, economic growth and a range of internal and global economic
issues working with the relevant cabinet members and heads of monetary and
fiscal agencies, reports directly to Buhari.
Its advice that petrol subsidy be
removed formed part of its presentation at its sixth regular meeting with the
President last Friday, when it also warned that the subsidy regime would worsen
solvency of state governments.
According to the document
presented at the meeting, the council drew Buhari’s attention to three issues
that it said required urgent attention.
They include the need for policy
clarity with regard to fuel subsidies which it said would help resolve the
dilemma which rising crude oil prices present; the worsening security
environment which it said had adversely affected food production leading to
higher prices; and the need for the Petroleum Industry Bill to encourage
investment in Nigeria’s oil and gas sector.
The council noted that improving
crude oil prices had led to what it called the Nigerian ‘dilemma.’
The dilemma, it said, resulted
from the conflicting implications of higher crude oil prices on the nation’s
economy.
According to the council, rising
crude oil prices improve public sector revenue and reserves of foreign currency
while higher crude oil prices mean that the cost of imported petrol should be
higher than the N167/litre being paid at filling stations.
It noted that the restoration of
subsidies created a set of significant problems.
It added that as there was no
provision for subsidy payments in the 2021 budget, such payments would have to
be done by the Nigerian National Petroleum Corporation thereby further reducing
revenues accruing to the Federation Account.
This situation, it said, was capable
of worsening the solvency of many state governments and could take the country
back to 2015 when the Federal Government had to provide ‘bailout’ funding to
the states.
The Salami-led group added that
restoration of subsidy made investment in Nigeria’s downstream oil sector
unattractive.
