President Muhammadu Buhari has been advised totally remove subsidy on petrol, in order to allow for a pricing regime that reflects the cost of the commodity.
The advice was given to Buhari by the Presidential Economic Advisory Council which was set up by the President in 2019. The Council is chaired by Prof Doyin Salami.
The advice that petrol subsidy be removed formed part of its presentation at its sixth regular meeting with the President last Friday. It warned that the subsidy regime would worsen solvency of state governments.
Documents presented at the meeting indicates that the council drew Buhari’s attention to three issues that it said required urgent attention.
They include the need for policy clarity with regard to fuel subsidies which it said would help resolve the dilemma rising from crude oil prices; the worsening security environment which it said had adversely affected food production leading to higher prices; and the need for the Petroleum Industry Bill to encourage investment in Nigeria’s oil and gas sector.
The document noted that improving crude oil prices had led to what it called the Nigerian ‘dilemma,’ which it said resulted from the conflicting implications of higher crude oil prices on the nation’s economy.
The document stated also that rising crude oil prices improve public sector revenue and reserves of foreign currency while higher crude oil prices mean that the cost of imported petrol should be higher than the N167/litre being paid at filling stations.
It noted that the restoration of subsidies created a set of significant problems, adding that as there was no provision for subsidy payments in the 2021 budget, such payments would have to be done by the Nigerian National Petroleum Corporation thereby further reducing revenues accruing to the Federation Account.