Economic Council calls for Reduction of Petroleum Subsidy

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 has adviced that petrol subsidy be removed.

As part of its presentation at its sixth regular meeting with the President last Friday, 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 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 (NNPC) thereby further reducing revenues accruing to the Federation Account a situation 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.