Nigeria's petrol subsidy has been a contentious issue of late, with it sparking a national debate as to whether it is necessary or is just a drain on public resources. It has also been seen as a conduit for corruption, creating a raft of millionaire oil marketers who have become immensely wealthy as a result of government handouts.
Over recent years, there have been huge demonstrations in the country calling for the scrapping of the subsidy, forcing the government to review the policy. President Buhari was elected to combat corruption in public life and appears to have now decided to abolish what he sees as a wasteful subsidy.
In addition, President Buhari is also said to be working on unbundling the state-owned Nigerian National Petroleum Corporation (NNPC), to make it more efficient in the production and delivery of products. These proposals form part of the strong recommendations made by the transition committee raised by President Buhari to work out a blueprint for his administration.
One transition committee member said: “Labour is part of the decision, as they have accepted the proposal of fuel subsidy removal. A committee is likely to be set up by the federal government to work out the modalities of what is to be done in that respect but the truth is that total removal of fuel subsidy has been recommended with adequate provisions for palliatives on free education and social welfare for the unemployed.”
According to the source, unlike in the past, the Buhari administration is considering the provision of free meals for students to serve as incentives for them to enrol in school. He added that all refineries in Nigeria are to be made to work at maximum capacity by the federal government to be able to deliver adequate products to the consumers too.
He said that the era of allocating more crude than any refinery in Nigeria can process was over, as it was discovered that the policy encouraged corruption and the diversion of funds. Furthermore, the committee member disclosed that the federal government was set to block all channels of fund leakages in the NNPC.
Meanwhile, hopes of resolving outstanding subsidy issues hampering the normal supply of petroleum products across the country appear kindled as the special investigating team set up to look into the matter has recommended the payment of the controversial N160bn (£507m) claimed by oil marketers. As a result, bankers have resumed credit lines to the sector while imports by marketers have resumed.
Bankers said that confidence was gradually returning to the oil marketing sector which they had classified as high-risk in the wake of the subsidy claims disagreement, indicating that some of them have resumed granting loans to the sector. The disagreement had put about N300bn banks’ risk assets in danger of default, escalating the industry non-performing loan ratio to almost 4% with the worst performing banks hitting above 8.5% aggregate and over 40% in the oil sector.
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