• Nigeria spends $4m daily on subsidy since 1988, says Soyode
Despite concerns about the utilisation of taxes in Nigeria, as well as the dwindling purchasing power of many Nigerians, a former Projects Coordinator for the Warri and Kaduna Refineries, Babajide Soyode, has asked the Federal Government to revisit the issue of petroleum consumption tax to mop up revenues.
Having claimed to remove subsidy from imported refined petroleum motor spirit (petrol), Soyode, who was also a former General Manager at the two refineries, advised the government to explore imposing taxes on the commodity, to check borrowing and mitigate slipping into another round of recession.
Indeed, today’s reality is that despite an installed capacity of 445,000barrels daily (b/d), Nigeria still struggles to achieve adequate and stable supply of refined products.
The nation’s refineries have not at any time aggregately operated at full capacity, and have over the years fallen into a state of disrepair due to neglect, irregular and/or shabby turn around maintenance regimen, as reliance on importation make up the short-falls in daily supply of refined petroleum products domestically.
Soyode, in a televised interview programme monitored by The Guardian, said the economy has been shackled to the global prices of oil, thereby compromising the country’s exchange rate, adding that any time oil prices rise, the Central Bank of Nigeria (CBN), either has to source for foreign exchange or devalue the naira to support such consumption.
“When subsidy started, it was $4million daily that was used to support petrol price. Crude oil was $18 per barrel in 1988. Babangida ordered us to sell to the refineries at $2. I was the Group General Manager Corporate Planning at that time. There was no law to that effect.
“There is no law backing subsidy, and that is why it can be removed without law. NNPC is spending so much money and trading losses. In 1988, when Babangida directed the NNPC to subsidise fuel prices as a result of Structural Adjustment Programme (SAP), the economy became tied to the foreign exchange and price of crude,” he explained.
He confirmed that subsidy is gone forever, as market forces will take over and dictate the price, going forward.
“We are consuming about 30 million litres of petrol daily and 10 million litres of diesel. If we raise our prices to reflect the market rate, government will be making so much more from oil prices. This is why the European Union countries are not worried about the price of oil. Though subsidy has been removed, it is not sufficient for the economy. We need to re-introduce petroleum tax. Now is the time to pay back through taxes like our colleagues in Ghana and the others.
“Subsidy removal is not adequate to solve our problems now. The Federal Government should immediately introduced fuel tax to the same level as our neighbouring countries in order to make $21 million daily. That will be about 60 cents a litre. Let us match the discipline of our neighbouring countries.
“Whenever crude oil price rises, petrol price will rise as well. This has been the practice in neighbouring countries. They are paying an average of N290-N300 per litre. Smuggling will continue if prices are not adjusted
“With the subsidy removal and introduction of fuel tax, the tax can be used for critical infrastructure while the subsidy can be used for social amenities like health and education. Without the private sector presently, the covid-19 couldn’t have been handled properly,” he added.
He however noted that there is hope for the economy as NNPC refineries will be re-activated within the next three years, while Dangote Refinery is expected to kick off next year, thus making Nigeria the petroleum hub of the region.