As the February 2023 elections approach, a major discussion that candidates representing parties will need to focus on is the rising cost of fuel subsidies, which forces the government to spend and neglect other areas of capital development. human for petroleum fuel.
The opening up of the economy after the Covid lockdown catalyzed by stimulus programs and also the Russian invasion of Ukraine saw crude oil prices surge above $100 and also made the Middle East the star bright spot in the global IPO market this year so far.
However, for Africa’s largest economy, low fuel prices are as much of a problem as high fuel prices. Nigeria, which lacks local refining capacity (until the arrival of the Port Harcourt Refinery Renovation and Concession Project and the Dangote Refinery), still has to import most of its fuel, which poses its own problems.
Fuel subsidy costs in Nigeria have 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 revealed by a socio-economic research company, SBM Intelligence in a February report titled “Rising Fuel Prices and Transport Costs: Which Way Nigeria.”
In addition, former Senate President Bukola Saraki challenged the federal government’s plans to spend on gasoline subsidies based on consumption of 70 million liters per day, saying that the fuel consumption of the Nigeria cannot exceed 35 million liters per day, and has hinted that Nigeria could subsidize fuel for neighboring West African states.
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He added that in 2011, when the FG said Nigerians were consuming 30-35 million liters a day, “We said at that time that it was too much, and we took action and made a recommendation and the government at the time under the Ministry of Finance, Okonjo Iweala, took certain measures which resulted in a reduction of the grant of approximately $500 million.
“Now today saying we are going to spend 3 trillion naira certainly does not fit, now I am being told we are consuming 70 million lite per day which is not possible. »
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He warned that Nigerians cannot consume more than 30-35 million liters because there is no doubt that these liters of fuel cross the border and the government turns a blind eye.
However, these warnings fell on deaf ears, as Nairametrics reported in April that following the approval of a revised budget for 2022 by the Nigerian Senate on Thursday, there were an amended upward revision to the Premium Motor Spirit Grant (PMS) budget amount for 2022 of N442.72 billion from N3.557 trillion to N4 trillion.
Nigeria’s subsidy payments are also facing another challenge of crude oil theft, as the Nigerian Upstream Petroleum Regulatory Commission has warned, due to crude oil theft, Nigeria has lost $1 billion revenue in the first quarter of 2022.
Wale Tinubu, the Group Managing Director, Oando Plc, at 2022 Nigerian Oil and Gas (NOG) last week also sounded the alarm when he noted that Nigeria may not be able to meet its OPEC quota in September due to increased theft of crude oil which has seen Africa’s largest economy lose 20% of its daily crude output in the profit from oil thieves and pipeline vandals.
What this means so far is that the Nigerian government is paying increased fuel subsidy costs per liter without doing due diligence on the increased consumption and production of fuel needed for the fuel subsidy. under-recovery is reduced through increased crude oil theft. This leads to making the subsidy program an expensive government enterprise, especially in times of ASUU strikes, poor power generation and grid outages due to poor investments in power distribution, insecurity growing and others.
So what are Nigeria’s top presidential candidates saying about fuel subsidies and power generation?
Pierre Obi, the Labor Party presidential candidate has said he will scrap the fuel subsidy if elected president of Nigeria in 2023.
He added that to remove fuel subsidies, Nigerians must trust their government to pass the cost on to areas that affect human development, especially health, education and electricity.
- Obi said:Over the past 10 years, the subsidy has reached over $40 billion. It’s a leaky pipe. That’s to say; we’ve spent over $40 billion on grants.
- “Total expenditure on education over the past 12 years is around N8 trillion. So in 10 years it’s about 8 trillion naira.
- “The most critical areas of development are health and education, with less spending than the fuel subsidy”
- “If we spent the next $20 billion on electricity, we would have generated at least 20,000 MW.
The other candidates, however, have not yet addressed fuel subsidy issues directly, but have noted the importance of increased government revenue and effective spending to be channeled into power generation and fuel refining. fuel.
Atiku Abubakar, candidate of the People’s Democratic Party has indicated that he hopes reach 25,000 MW thanks to a mix of non-renewable energies (hydraulic, solar, nuclear) and other thermal fuels (coal, biofuel) in addition to natural gas.
It also hopes to reach 10,000 to 15,000 MW in the short term, before reaching the target. Nigeria currently generates electricity through Therma and Hydro.
He also noted that the country is expected to refine 2 million bpd by 2027, an action that will reduce government spending on fuel subsidies.
Bola Ahmed Tinubu, the All Progressive Congress (APC) presidential candidate, has pledged to build 15,000 megawatts of power generation if elected as Nigeria’s next president in the 2023 presidential election, which he says will happen by more »government loan” and private partnerships.
- He stated, “My administration would combine government financing, debt, public-private partnership, private sector financing and concession to launch a medium to long-term financial model for the BANN (Build A New Nigeria) initiative.
- “I will embark on a renewed focus on action and take immediate and urgent action to resolve existing challenges in power plants, gas purchasing, pricing, transmission and distribution. My Administration’s critical goal is to have 15,000 megawatts distributable to all classes of consumers nationwide to ensure a sustainable 24/7 supply over the next four years.
- “My administration will build an efficient, fast-growing and well-diversified emerging economy with real GDP growth averaging 12% per year over the next four years, translating into millions of new jobs over that time,” he added.