THE Federal Government has once again raised the alarm on dangers of sustaining fuel subsidy regime in the downstream sector.
The Coordinating Minister of the Economy and the Minister of Finance, Dr Ngozi Okonjo-Iweala, stated in a statement on Wednesday that more than half of the amount budgeted for 2012 subsidy has been expended to offset 2011 subsidy arrears.
According to the statement: “Nigeria budgeted N888 billion for fuel subsidies this year but N451 billion has been spent on back payments for 2011, this is more than double what was to be paid as arrears.
“This is clearly not sustainable and the ministry has a responsibility to ensure that the lapses that may have led to this unhealthy situation are not repeated.”
Nigeria will need to dip into the Excess Crude Account (ECA) again once the budgeted amount has been exhausted or risk accumulating more debt to sustain huge subsidy payments. The ECA currently stands at $3.5 billion and it could be wiped out by the end of the year if the government fails to exercise cautions.
The House of Representatives ad hoc committee, which probed fuel subsidy management recently, had uncovered over one trillion naira fraud in the subsidy regime and stated that Nigeria spent N2.58 trillion last year on subsidy payments, more than 900 per cent the budgeted amount for the year.
President Goodluck Jonathan, the Minister of Petroleum Resources, Diezani Alison-Madueke and the finance ministry had pledged to clean up the inefficiencies, but the latest data shows spending remains out of control.
According to the report by the ad hoc committee, the Nigerian National Petroleum Corporation (NNPC) owes about $3.5 billion to oil traders, including Trafigura.
The ECA, which is supposed to cushion the economy against sudden oil price falls, contained more than $20 billion in 2007 but has been depleted by continual raiding despite a period of record oil prices.
Meanwhile, the Group Managing Director of the NNPC, Mr Austin Oniwon, on Wednesday, said only a full deregulation of the petroleum sector would ensure stability in the sector.
Oniwon, who made the declaration while appearing before the Senate joint committee probing the oil subsidy regime, said although deregulation could come with some pains in the interim, Nigerians would, at the end of the day, enjoy price stability.
Written by Adewunmi Akinpelu
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