Lagos Chamber of Commerce and Industry, LCCI, has described fuel subsidy which the World Bank said cost Nigeria N731 billion in 2018, as the biggest fiscal burden currently staring the nation’s economy in the face.
Muda Yusuf, LCCI boss LCCI, which response was based on the World Bank report, released on Monday in Abuja focussed on key developments in Nigeria’s economy in 2018, added among other things that the Excess Crude Account, ECA, was virtually depleted during the period.
In November 2018, the bank had also stated in another report entitled: ‘Nigeria Bi-annual Economic Update for Fall 2018,’ that petrol subsidy deductions for 2017 full year was N107.3 billion, but its current report showed that N731 billion was spent in 2018 alone.
It had stated that most of the petrol volumes Nigeria spent money to subsidise in 2018 were inflated as daily consumption rose to 54 million litres per day (ml/d) from 40ml/d in 2017, ostensibly due partly to out-smuggling. But Director General, LCCI, Mr. Muda Yusuf, said: “Perhaps the biggest fiscal burden on the economy today is the petroleum subsidy regime.
It is a big hole in the finances of government. It puts tremendous pressure on the foreign reserves and the foreign exchange market, just as it exerts immense stress on the nation’s treasury.
“It remains a cause for concern that the subsidy regime had 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; at a time when public institutions are finding it hard to fund their basic obligations. There cannot be a better example of resource misapplication.
World Bank lowers forecast for Nigeria’s economic growth to 2.1% “There are two components of this: The first is the genuine subsidy, which is the differential between the pump price and the landing and other costs of fuel. The second [and more disturbing component] is the transparency problems inherent in the fuel subsidy administration, including the petroleum equalisation policy. For several years, the economy suffered severe bleeding from this phenomenon.
“One of the critical elements of the Oil and Gas Sector reform, particularly the downstream sector, is the complete deregulation of the sector. This is the spirit of the Petroleum Industry Bill which, regrettably, has not seen the light of the day.
The reform of the oil and gas sector would create a number of advantages for the economy. “It will free resources for investment in critical infrastructure such as power, roads, the rail system, health sector, education sector etc. The deficit in all of these infrastructure areas is phenomenal.”