The Presidential Economic Advisory Council has asked the President, Major General Muhammadu Buhari (retd.), 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, a copy of which was obtained by The PUNCH on Sunday, 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 council stated, “As there is no
provision for subsidy payments in the 2021 budget, such payments will have to
be done by the NNPC thereby further reducing revenues accruing to the
Federation Account.
“The solvency of many state governments
will worsen – this could take us 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.
The document read, “Council advises as
follows: there is an urgent need for clarity and consistency in petrol pricing
policy.
“Subsidy on petrol be removed and a pricing
regime which reflects the cost of petrol adopted.
“It is noteworthy that with the exception
of petrol, the prices of all other petroleum products have been deregulated;
the cost of retaining the subsidy outweighs the benefits, or that the benefits
of removing the subsidy are far greater than the costs.
“Data published by the National Bureau of
Statistics also show that petrol prices are not the same across Nigeria.
“In March 2021, petrol prices range between
N162.17 and N200.87/litre –the highest being in Lagos State whilst the lowest
prices are obtained in Adamawa State.
“Council is especially concerned that in
addition to further worsening government revenue, re-introduction of subsidies
will jeopardise investment in the oil sector and also create uncertainty about
general government policy on pricing.”
On security, the council noted that there
was a consensus on the worsening of the security situation in Nigeria.
It listed the sources of security
challenges to include Boko Haram and ethno-religious conflicts; political
violence; economic and resource-based violence; organised violent groups; and
herders/farmers /settlers clashes.
The council noted that violence had had
impact on human capital and on poverty and vulnerability while physical capital
and infrastructure are often damaged; while business and investment suffer.
It noted that the economic cost of
insecurity was estimated at 2.6 per cent of GDP in 2020, or $10.3 billion.
On the way out, the council advised the FG
to among others, “Defeat Boko Haram decisively, as a decisive defeat is
necessary to permanently keep the insurgency at bay.
“There is need to review strategy as to the
way forward, examining all options -including seeking the assistance of
external powers.
“Improve the implementation of policies
aimed at improving access and quality of education in underserved areas.
“Implement existing law on compulsory
attendance of primary school to reduce the number of out of school children, a
key recruiting ground for thugs.
“Resolve grievances around exclusion from
access to power, opportunity, and representation through dialogue.
“To be effective, government should involve
civil society, the private sector, regional and international organisations
focused on peace and conflict resolution in roundtable discussions aimed at
resolution of grievances.”
On the PIB, the council noted the progress
of the bill through the National Assembly.
It said, “The importance of this bill to
the national economy cannot be overstated.
“When enacted, this law will have a
profound effect beyond the oil and gas sector.
“Potentially, this bill could provide a
basis for building and industrial economy for Nigeria.
“Implementation of the Paris Agreement has
seen a continuous global transition away from fossil fuels towards renewables
as primary energy source.
“The PIB will join the National Petroleum
Policy and the National Gas policy in defining the environment for investment
in the oil and gas sector and also influence sentiment around Nigeria as an
investment destination.”
In a statement released by the Special
Adviser to the President on Media and Publicity, Femi Adesina, at the end of
the meeting on Friday, the Presidency left out the issue of removal of petrol
subsidy from the issues raised by the council while it mentioned the remaining
two issues- security and the PIB.
Source: punchng.com
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