Stakeholders in the oil and gas industry on Sunday demanded an end to the Petroleum Subsidy Fund (PSF) scheme, warning that the N800 billion debt servicing to oil marketers was unsustainable.
They equally advocated a total deregulation of the downstream sector of the petroleum industry as its would unlock the huge private investment potential and also stimulate sustainable growth.
The stakeholders however expressed concerns over the huge amount of money spent by the Federal Government annually on subsidy payment, saying such reources could have been used to develop other sectors of the economy.
According to the Minister of State, Petroleum Resources, Dr. Ibe Kachikwu, subsidy on Premium Motor Spirit (PMS), otherwise known as petrol, currently stands at over N1.4 trillion.
This was as the Director General of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, lamented that the biggest burden on the country’s economy today is the petroleum subsidy regime.
Yusuf said the government should encourage private sector players to take over the downstream sector of the petroleum business.
“When this is done, most of the challenges we see today regarding subsidy, refineries and others will be adequately addressed.
The government should only play a regulatory and not an operational role. Government has no business refining petroleum products, retailing or distributing fuel as well as the marketing of these products. We cannot continue to carry that kind of burden in the oil sector,” he said.
Yusuf regretted that subsidy has left a big hole in the finances of government, adding that it has also put tremendous pressure on the foreign exchange market and Nigeria’s foreign reserves, while exerting immense stress on the nation’s treasury.
“It remains a cause for concern that the subsidy regime has subsisted, especially at a time when the economy is facing unprecedented fiscal challenges. At a time when productivity in the economy is constrained by acute infrastructure deficit; when public institutions are finding it hard to pay salaries; there cannot be a better example of resource misapplication than payment of fuel subsidy.
“There are two components to this; the first is the genuine subsidy, which is the differential between the pump price and the landing and other costs of fuel.”
The stakeholders said it had become imperative for government to embark on total deregulation of the downstream sector to attract investors and also save the country from the huge amount spent on subsidy.
Also commenting, Executive Director, Blue Sea Energy Limited, Mr. Felix Andrew, lamented that the continuous payment of subsidy was not sustainable, urging government to liberalise the downstream market and encourage “free entry, free exit” to attract investors in the sector.
He said it remained worrisome that Nigeria spends about N1.7 trillion on fuel subsidy annually while its education and health sectors can only access a paltry budget of N300 million and N400 million respectively.
According to him, it is obvious that the fuel subsidy programme is placing a huge financial burden on the nation’s resources.
“There is no better time to deregulate as this initiative is an enabler in freeing up scarce resources to address the concerns clearly expressed by the citizens for which political leadership is unable to find the resources to satisfy, such as providing adequate funding to support the health and education sector; improved infrastructure and better working conditions for the average Nigerian worker, among others.”