As the February 2023 election draws closer, one major discussion the candidates representing the parties will have to focus on is the rising cost of fuel subsidies which forces the government to spend and neglect other areas in human capital development for petroleum motor fuel.
The economy opening up after the Covid lockdown catalyzed by the stimulus programmes and also the Russian invasion of Ukraine has seen crude oil prices rise above $100 and also made the Middle East the shining star in the global IPO market this year so far.
However, for Africa’s largest economy, low fuel prices are as much a problem as high fuel prices. Nigeria which lacks local refining capacity (until the proposed renovation and concession of the Port Harcourt refinery and Dangote refinery comes onboard), still needs to import most of its fuel, which comes with its own variety of issues.
The costs of fuel subsidy in Nigeria increased by 890% over a five-year period (2017-2021) in Nigeria even though fuel prices have only increased by 12.1%, and transport costs by 283%, which was disclosed by socioeconomic research firm, SBM Intelligence in a February report titled “Growing fuel prices and transport costs: Which way Nigeria.”
Also, the former Senate President, Bukola Saraki challenged the Federal Government’s plans to spend on petrol subsidy based on 70 million litres a day consumption, stating that Nigeria’s fuel consumption cannot be more than 35 million litres a day, and hinted that Nigeria could be subsidizing fuel for neighbouring West African states.
He added that in 2011 when the FG said Nigerians were consuming 30 to 35 million litres a day, “We said at that time that it was too much, and we took steps and made a recommendation and the then government under the Ministry of Finance, Okonjo Iweala, took certain steps that resulted in government seeing a reduction in subsidy by about $500 million.
“Now today, saying we are going to spend N3 trillion, is definitely not adding up, now I am told we consume 70 million lites a day which not possible.”
He warned that Nigerians cannot be consuming more than 30 to 35 million litres, as there is no doubt that those litres of fuel are going across the border, and the government is turning a blind eye.
However, those warnings fell on deaf ears, as Nairametrics reported in April that following the approval of a revised 2022 budget by the Nigerian Senate on Thursday, there was an amended upward review of the budget amount for Premium Motor Spirit (PMS) subsidy for 2022 by N442.72 billion, from N3.557 trillion to N4 trillion.
Nigeria’s subsidy payments is also facing another challenge of crude oil theft as the Nigerian Upstream Petroleum Regulatory Commission, warned that due to crude oil theft, Nigeria lost a staggering $1 billion in revenue in the first quarter of 2022.
Wale Tinubu, the Group Chief Executive Officer, Oando Plc, at the 2022 Nigerian Oil and Gas (NOG) last week also sounded the alarm bells when he noted that Nigeria may not be able to meet its OPEC quota in September due to rising crude oil theft which has seen Africa’s largest economy lose 20% of its daily crude production to oil thieves and pipeline vandals.
What this means so far is that the Nigerian government is paying increased costs of fuel subsidy per litre without conducting due diligence on increased consumption and that the fuel production needed for under-recovery subsidy is reduced thanks to rising crude oil theft. This leads to making the subsidy programme an expensive government venture, especially in a time of ASUU strike, poor electricity production and grid failures due to poor investments in power distribution, rising insecurity and others.
So what are Nigeria’s top presidential candidates saying about fuel subsidy, power generation?
Peter Obi, the Presidential candidate for the Labour Party stated that he would remove fuel subsidy if elected president of Nigeria in 2023.
He added that to remove fuel subsidies, Nigerians need to trust their government into passing the cost into areas that affect human development, especially health, education and power.
Obi said, “In the last 10 years, the subsidy has gotten to over $40 billion. It’s a sinking pipe. That is; we spent over $40 billion on subsidies.
“Total education expenditure in the past 12 years is about N8 trillion. So in 10 years, it is about N8 trillion.”
“The most critical areas of development are health and education, with an expenditure less than fuel subsidy”
“If we spent the next $20 billion in power, we would have been generating at least 20,000 MW.
The other candidates, however, are yet to address the issues of fuel subsidy directly, but they have noted the importance of increased government revenues and efficient spending to be channelled towards power generation and fuel refining.
Atiku Abubakar, candidate for the Peoples Democratic Party noted that he hopes to achieve 25,000MW through a mix of non-renewable energy (hydro, solar, nuclear) and other thermal fuels (coal, biofuel) in addition to natural gas.
He also hopes to achieve 10,000-15,000MW in the short run, before hitting the target. Nigeria currently generates electricity through Therma and Hydro.
He also noted that the country should refine 2 million bpd by 2027, an action which will reduce government spending on fuel subsidies.
Bola Ahmed Tinubu, the presidential candidate of the All Progressive Congress (APC), promised to build 15,000 megawatts of power generation if elected as the next president of Nigeria in the 2023 presidential election, which he says will be done through more “government borrowing” and private partnerships.
He stated, “My administration would combine government funding, borrowing, public-private partnership, private sector financing and concession to initiate a medium and long-term financial model for the BANN (Build A New Nigeria) initiative.
“I will embark on a renewed action-oriented focus and take immediate and urgent action on resolving existing challenges of power generation plants, gas purchasing, pricing, transmission, and distribution. My administration’s critical goal is to have 15,000 megawatts distributable to all categories of consumers nationwide to ensure 24/7 sustainable supply within the next four years.”
“My administration will build an efficient, fast-growing, and well-diversified emerging economy with a real GDP growth averaging 12% annually for the next four years, translating into millions of new jobs during this period,” he added.
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