Pinnacle Oil and Gas Limited, a Nigerian oil and gas company, has alleged that the Nigerian government is currently spending about £1 trillion every month on petrol subsidies.
This revelation was made by Mr Robert Dickerman, the Managing Director/CEO of Pinnacle Oil, during a panel discussion at the Nigeria Downstream Forum, which was part of the recently concluded Nigeria International Energy Summit (NIES) in Abuja.
Dickerman made mention that a significant subsidy was still in place, which has made the price of petrol relatively affordable, but warned that it could potentially encourage smuggling activities across neighbouring countries.
“Foreign investors, foreign lenders and government-run DFIs have been very clear about what they want to see: Conservative fiscal policy, tackling corruption, enabling competitive markets, and enforcement of fairness in markets through policy, regulation and the ability to enforce contracts. Keeping that context in mind, I want to point out that there is still a massive subsidy in PMS, albeit in the FX portion of PMS Price, not the global price in dollars.
“The consequences of this subsidy are: The cost of gasoline in Nigeria is the lowest in Africa by far, which encourages smuggling out, further depriving Nigeria of value. Smuggling causes Nigeria to subsidize neighbouring countries even while our economy struggles. The cost is hurting the entire budget, Federal and State, as critical programs cannot be funded to pay this subsidy. It is currently calculated to be about 1 trillion Naira/month.
“Also, with this subsidy in place, ceasing subsidy payments would result in no petrol supply, if there are no refineries producing gasoline. All supplies come from the international market, which will only sell at market prices.
