The Nigerian government has acknowledged that the cost of fuel subsidy on petrol between 2005 and 2021 could be more than N13 trillion ($74 billion) if the economic and opportunity costs of the policy are computed in financial terms. This was disclosed by the Secretary to the Government of the Federation, Mr. Boss Mustapha, during the launch of the Nigeria Extractive Industries Transparency Initiative (NEITI) strategic plan 2022-2026, in Abuja.
Mr. Mustapha, who was represented by the Permanent Secretary of General Services, Mr. Maurice Mbaeri, noted that the cost “in relative terms is equivalent to Nigeria’s entire budget for health, education, agriculture, and defense in the last five years, and almost the capital expenditure for 10 years between 2011‑2020.” He added that the cost could be more if other economic and opportunity costs to the nation are computed in financial terms.
He explained that the government would continue to follow the ongoing debate on the issue, adding that “a comprehensive position to guide the incoming administration on when and how to make this decision is being developed by the Presidential Transition Council which I currently head. I therefore have no doubt that the incoming administration will consider our position on the issue and make an informed decision in the overriding public interest”.
The Secretary to the Government of the Federation highlighted the negative impact of the subsidy policy on Nigeria’s economy, including “the slashing of allocations for the health, education, and technology infrastructure sectors; Deterioration of the downstream sector with the declining performance of Nigeria’s refineries, a dinscentivised private sector investment in the down and mid-stream petroleum sector; Low employment generation since the refining process is done outside the shores of Nigeria and inefficient supply arrangements which often leads to scarcity and its attendant queues, etc.”
He further commended the Nigeria Extractive Industries Transparency Initiative (NEITI) for shedding light on the operations of the extractive industries over the years. He added that the government was determined to sustain the implementation of the extractive industries transparency initiative (EITI)’s principles in the management of Nigeria’s oil, gas, and solid mineral resources.
In response to Mr. Mustapha’s speech, the Executive Secretary of NEITI, Dr. Orji Ogbonnaya Orji, called for the liberalisation of the solid mineral sector, saying such a policy would attract investment into the mining sector. Dr. Orji noted that the solid minerals sector has the potential to contribute over 60 percent to the Gross Domestic Product, GDP, from its current 1.8 percent.
“From NEITI reports, a total of N624.1 billion was recorded as revenue that has accrued to the government from the sector over a 13-year period which in today’s exchange rate amounts to about $1.4 billion compared to the enormous $394 billion earned in the oil and gas sector in just 10 years. This shows negligence to the enormous potentials in the solid minerals sector”, he said.
Dr. Orji also explained that the new 5-year strategic plan would enable NEITI to enhance extractive sector governance reforms through policy research, strategic stakeholder engagement, communication, and inter-agency collaboration.
Meanwhile, the Chairman of the NEITI Board, Bar Olusegun Adekunle, thanked President Muhammadu Buhari for providing NEITI with a befitting new office complex, adding that it now has a conducive environment for its staff to work.
The Nigerian government has been grappling with the issue of fuel subsidy for years, and many stakeholders have been calling for the removal of the subsidy to free up funds for other sectors. The country’s reliance on oil exports has left it vulnerable to fluctuations in global oil prices, and the fuel subsidy has been a significant drain on government finances.