The Independent Media and Policy Initiative (IMPI) has warned that proposals to subsidise crude oil for local refineries could create another major burden on Nigeria’s finances, arguing that the country should focus instead on expanding domestic refining.
The policy research group said President Bola Tinubu’s decision to end petrol subsidy at the start of his administration was unavoidable because the Petroleum Industry Act had already provided for the withdrawal of government intervention in the downstream petroleum sector.
In a policy statement on Wednesday signed by its Chairman, Dr Omoniyi Akinsiju, IMPI said Tinubu’s declaration that “subsidy is gone” on May 29, 2023, effectively closed the transition window created by the 2021 PIA.
The group argued that delaying the announcement could have encouraged hoarding, artificial scarcity and cross-border diversion of petroleum products.
“Our research showed that President Tinubu’s explicit, unscripted declaration during his inaugural address served as a decisive policy signal to close the transition window and eliminate administrative ambiguity,” it said.
IMPI said the subsidy removal also allowed the Federal Government to redirect resources previously spent on petrol subsidy while introducing measures intended to cushion the effect of higher fuel prices.
It listed the Presidential Compressed Natural Gas Initiative, increased Federation Account Allocation Committee disbursements, temporary wage awards, the new national minimum wage and targeted cash transfers among the measures introduced after the subsidy removal.
The group also cited the expansion of domestic refining capacity and the naira-for-crude policy as efforts aimed at reducing foreign exchange constraints in supplying crude to local refineries.
However, IMPI criticised proposals by African Democratic Congress presidential candidate Atiku Abubakar and Nigeria Democratic Congress candidate Peter Obi for returning to some form of fuel subsidy.
It specifically faulted Atiku’s proposal for the government to supply crude to local refineries at discounted or fixed below-market prices, describing the arrangement as a form of production subsidy.
“Policy proposals that promise cheap energy through state-mandated crude discounts are economically unsustainable,” IMPI said.
The group argued that such proposals were based on the assumption that the government had unlimited crude available for subsidised domestic refining.
According to IMPI, Nigeria’s gross crude production currently averages between 1.35 million and 1.65 million barrels per day, while only about 800,000 to one million barrels directly accrue to the Nigerian state through NNPC Limited and the Nigerian Upstream Regulatory Commission.
It said this represented between 55 and 65 per cent of national production, warning that using the state’s share to support discounted crude supplies could become fiscally unsustainable.
IMPI urged policymakers to prioritise stronger domestic refining, alternative energy sources and measures to ensure that increased government revenues translate into tangible relief for households and businesses.
The group maintained that Nigeria should avoid policies that could recreate the financial pressures associated with petrol subsidy under a different arrangement.
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