The Nigerian government spent over N4 trillion on fuel subsidies in the fiscal year 2022, with total imports of premium motor spirit (PMS) standing at 23.5 billion litres over the year.
According to Farouk Ahmed, CEO of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), who revealed this in Abuja at the ongoing Energy Labour Summit, the average daily truck out over the last eight years has been over 55 million litres per day, with a peak of 66.7 million litres recorded for the year 2022.
The Summit was organised by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN).
Ahmed said that Nigeria has enormous reserves of over 37 billion barrels of crude oil and over 206 trillion cubic feet of gas.
Bashir Sadiq, executive director of corporate services and administration at the agency, spoke on behalf of the CEO, saying, “The country needs a very robust mid and downstream sector to maximise the inherent values that can be derived from these resources.
“The mid and downstream sector is where the most value derivable from the nation’s hydrocarbon resources can be obtained through the creation of employment, accelerated industrialization of Nigeria, security of energy and generation of revenue to list just a few.”
He emphasised the importance of a transparent mid and downstream sector as a crucial tool for attracting investments, promoting efficiency, competition, and the sector’s long-term development.
According to him, the Petroleum Industry Act (PIA) 2021, the governing legislative instrument that specifies the fundamental regulatory frameworks of the mid and downstream industries, has made significant provisions that will ensure optimal transparency in the sector’s activities.
“This is necessary to encourage and promote sustainable investment across the value chain and guarantee predictability for mid and long term business planning and ease of doing business.
“To entrench the above, on 16th August 2021, the long-awaited Petroleum Industry Bill was signed into law and it became the “Petroleum Industry Act 2021.
“This important milestone ushered in a new dawn in the history of the growth and prosperity of the Nigerian oil and gas industry through key industry reforms which include the removal of fuel subsidy and migration to a full market-based pricing for petroleum products which is the only way to attain a transparent mid and downstream value chain for petroleum products supply,” he said.
He noted that the rising cost of subsidy removal was mostly driven by a higher trend in global crude oil and product prices, freight rates, and other associated costs on the one hand, and a year-on-year increase in average daily evacuation from depots on the other.
According to him, the functioning of Nigeria’s subsidy regime has significantly impacted the speed of growth of the midstream sector by limiting refinery design/construction to just fully deregulated products.
He highlighted that Nigeria’s enormous midstream and downstream investment opportunities can only be fully realized in a fully operationalized market-based pricing system for all petroleum products.
“The financial implication of PMS subsidy rose to over N400 billion monthly which translates to over N4.8 trillion ($6 billion) annually making it unsustainable in the short to medium term.
“Subsidy on PMS hugely impacted Government revenues available to all tiers of government leading to inability of the government to meet their obligations,” he said
In addition, Ahmed stated that the Tinubu administration’s subsidy removal policy will facilitate the development of healthy competitive markets and operational efficiency, which will promote transparency and private sector investment in Nigeria’s oil and gas sector’s downstream value chain.