A report by the Nigeria Extractive Industries Transparency Initiative (NEITI) revealed that the amount spent by the country on subsidies between 2005 and 2021, would have constructed three refineries with the capacity to refine 450,000 barrels of crude per day each.
Between 2005 and 2021, Nigeria spent the sum of N13.697 trillion on subsidy payments, according to information sourced from the NEITI document.
The organisation noted that the worth of the money spent would build new refineries with a joint capacity of 1.350 million barrels-litre per day.
With the Organisation of Petroleum Countries (OPEC) putting Nigeria’s daily import of petrol and diesel at 465,000 barrels per day, this means if Nigeria had built three Refineries with 450,000 barrels/day capacity each, The country would have no need to import refined petroleum products like petrol.
According to NEITI, other infrastructural investments the country could have make with the money spent on fuel subsidies between 2005 and 2021 include; building electricity facilities that would have added 10,000 Megawatts to Nigeria’s electricity supply, 23,000 Solar-powered boreholes with storage tanks, 70,000 blocks of classrooms, 38,700 irrigation units, 3870 primary health centres and funding of 260 academic research programs in various fields.
NEITI stated that 90% of the beneficiaries of subsidy payments are the rich, while only 4% of fuel subsidies paid benefit the poor. The organisation also said that removing fuel subsidies would have little effect on mass transportation as 50% of buses, 25% of pick-up and vans, and 100% of lorries are powered by diesel.
A Dataphyte report noted that between 2018 and a half year 2022, Nigeria spent the sum of N13.5 trillion on refined petroleum importation.
NEITI also noted in the document that the expenditure on subsidies is way above the country’s budget for key sectors, such as health and education, among others.
ADataphyte review of the data also shows that the country, for instance, in 2018, spent more on fuel subsidies than the total budget for Power, Works and Housing, Education, Water, and Health ministries.
The total budget for the listed ministries in the year 2018 was N1.877 trillion, while the expenditure for subsidy in the year stood at N1.990 trillion.
Analysis by Dataphyte revealed the country has been spending a substantial percentage of its revenue on subsidy payments for over Fifteen years.
In the same vein, fuel subsidies widened the annual budget deficit gap.
NEITI stated that while Nigeria has made efforts to remove fuel subsidies in the past, new efforts at such removal should be gradual but sustained.
“Two factors should be considered in determining the size of the price adjustment. One of these is that the adjustment should be significant enough to influence basic indices but not large enough to create hardship for the poor,” the organisation said.
The document also recommended accelerated action on refineries rehabilitation to boost the domestic supply of petroleum products. It was also opined that there should be policy incentives to drive private investment to refineries.
The NEITI also advocated for implementation of welfare and interventionist programs. Some of the suggested programs include transport allowance for workers on grade levels 1-7, provision of public transportation support to the vulnerable.
The policy document also stated that the government should administer strict sanctions for activities like pipeline vandalism, crude oil theft, product diversion and any form of collusion between state and non-state actors in the oil and gas sector.
The Nigerian government has again announced its intention to remove fuel subsidies by mid-2023, backing it up with only a half-year provision for fuel subsidies in the 2023 budget.
It remains unclear if the policy would see the light of day due to similar attempts at removal; the most recent was in January 2022, with the government backtracking after condemnations in some quarters, especially the country’s workers’ union, Nigeria Labour Congress, which expressed fear on hardship such removal of fuel subsidies would mean for Nigerians.