Nigeria could be spending as much as N1.86 billion on subsidy daily going by the current landing cost of petrol which is N180 per litre, according to reports.
Speaking on NTA’s Good Morning Nigeria show, Ibe Kachikwu, the minister of state for petroleum resources, said the landing cost of petrol is now N180 per litre.
Figures from the September 2018 financial results of the Nigerian National Petroleum Corporation (NNPC) showed that daily petrol consumption has now averaged 53 million litres.
To maintain a retail price of N145 per litre, the government will have to pay N35 on every litre of petrol consumed.
Referring to the subsidy regime which ended in May 2016, the minister said the government could not sustain payments to marketers and still owes them.
“When you look at the gap today, the landing cost is about N180 per litre at a sale price of N145. Imagine if it (pump price) was N90-something; we will literally be a bankrupt country. Thank God it didn’t happen,” he said.
“I was gung-ho when I assumed this position that there was no way I was going to tolerate a subsidy regime at the time in 2015 of about N1.2 trillion, N1.3 trillion going on. There was just no way. We didn’t have the capacity to continue to pay. Today we’re still owing money arising from those subsidies.”
Different officials of the Buhari-led administration have denied paying subsidy; saying the NNPC is responsible for the under-recovery.
‘SUBSIDY CAN BE PHASED OUT SEQUENTIALLY’
Although the NNPC is presently the sole importer of petrol after private investors pulled out due to their inability to recoup their investments, Kachikwu said the subsidy regime can be phased out sequentially.
According to him, prioritising the rebirth of the refineries and deregulating the downstream sector to some extent, can phase out subsidy.
“I think, first and foremost, we need to find a way of fixing refineries fairly quickly. Whether it is the private sector, government funded or whatever, my preference has always been for private sector funding,” he said.
“It may well be possible to have a twin system whereby some filling stations are able to do their business on a commercial basis– they’re not government entities.
“They bring in products and sell at their own profit. We tried it when we removed subsidy the first time and what we found out was that prices started going down because the competition was very good for the system.
“Then you have NNPC which is government supported… come up with a system which says transporters can go through NNPC filling stations and over a period of time on an experimental basis, sell your own products at a slightly subsidised volume.
“What you will have is a huge volume of imported products, imported on a purely commercial basis, sold on a purely commercial basis, and some elements will obviously be semi-subsidised over a period of time until we find that there is no need to continue it.
“Ultimately, someday, we’ll get to a point where the issue of the price of selling a commodity is no longer the price of government.”