Lucky Obukohwo Reporting
The Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Mr Farouk Ahmed, has commend president Bola Tinubu for mustering the political will of removing the fuel subsidy saying that N4 trillion, representing about 20 percent of the 2022 budget, was spent on subsidy payment.
He gave the commendation while delivering his keynote address at the Petroleum and Natural Gas Senior Staff Association of Nigeria, (PENGASSAN) Summit in Abuja.
Mr. Ahmed said the subsidy has prevented the government to develop other sectors of the Nigeria economy.
Amhed said that the financial implication of the PMS subsidy rose to over N400 billion monthly which translated to over N4.8 trillion (US$6bn) annually, making it fiscally unsustainable in the short to medium term.
He also said that subsidy on PMS hugely impacted government revenues available to all tiers of government leading to the inability of the governments to meet their obligations.
“the operation of the subsidy regime in Nigeria also impacted the pace of development of the midstream sector by limiting refinery design/construction to only products that have been fully deregulated.
“The immense midstream and downstream investment opportunity that Nigeria holds can only be optimized in a fully operationalized market-based pricing environment for all Petroleum products”, Ahmed added.
Ahmed who was represented by Bashir Sadiq, Executive Director, Corporate Services and Administration, said, the perennial challenge of the fuel subsidy which has over the years encouraged inefficiency, waste, and environmental pollution, has been a major bottleneck to aligning to Sustainable Development Goals (SDGs) of providing cleaner energy.
Last year alone, Nigeria imported a total of about 23.5 billion Liters of PMS. Our average daily truck out over a period of 8 years stood at over 55 million Liters per day, with a peak of 66.7 million Liters recorded for the year 2022”.
He said the over N4 trillion spent on the subsidy, presented a strain on the fiscal viability of the government and became a major obstacle to inclusive participation in the downstream petroleum sector.
“Hence, on May 29, 2023, payment of subsidy on PMS was ended by the new administration of President Bola Ahmed Tinubu. This policy decision will facilitate the development of healthy competitive markets and operational efficiency that will promote transparency, private sector investment in the downstream value chain of Nigeria’s Oil and Gas sector”, he added.
According to the NMDPRA CEO, the complete Deregulation of the downstream sector was a regulatory and policy framework that was being implemented across all arms of relevant government organizations in strong collaboration with the private sector.
He assures that transparency across the entire supply chain of the downstream sector has been greatly enhanced and the expected impact of improved midstream sector would be created in the near term through increased domestic refining capacity in Nigeria.
Mr. Ahmed said, the general theme of the summit “Petroleum Industry De-regulation and Gas Utilization for a Sustainable Energy Future in Nigeria” was consistent with the strategic agenda of the Government and leadership of the energy sector.
He said, the implementation of effective policies and regulatory frameworks that ensure transparency in the downstream sectors are critical drivers required to develop a successful sector that will promote investment, deliver energy security, and ensure sustainable economic development for Nigeria.
Ahmed said, while Nigeria is greatly endowed with abundant reserves of crude oil and gas in excess of over 37billion barrels of crude oil and over 206TCF of gas, the preponderance of the produced resources are exported, therefore, the Country needs a very robust Mid and downstream sector to maximize the inherent values that could be derived from these resources.
He said, the Auto-gas and domestic LPG programmes are also being implemented to deepen the utilization of gas in a manner that supports the availability of cheaper and cleaner alternative energy sources for Nigerians.
“These programmes have a direct linkage to the removal of subsidy on PMS and the Federal Government is collaborating with its partner to provide CNG-powered mass transit vehicles and relevant CNG relevant infrastructures.
“The NMDPRA is accelerating the issuance of all regulatory instruments required to ensure a successful implementation of these policy initiatives”, he said.
“The authority is central to ensuring that all policies being implemented in the mid and downstream markets enjoy optimal regulatory support through the implementation of the various regulatory frameworks reviewed in this speech”, Ahmed said.