Lokpobiri: Without Tinubu’s Decision Fuel Subsidy ‘ll Cost Nigeria N21tn Annually - THISDAYLIVE

•Reveals $1.4bn of $1.5bn refineries’ fund already spent before he resumed

The Minister of State for Petroleum Resources (Oil), Senator Heineken Lokpobiri, yesterday argued that Nigeria would have been spending about N21 trillion annually on petrol subsidy at the current exchange rate if the regime had been retained.

Lokpobiri, who spoke in an interview on Channels Television, said the estimate was based on the N18.4 billion that former Minister of Finance, Zainab Ahmed, told the House of Representatives in 2023 that the country was spending daily on petrol subsidy.

He explained that the N18.4 billion daily subsidy expenditure, at the then exchange rate of N448 to the dollar, amounted to about $41 million a day and approximately $15 billion annually.

According to him, converting the $15 billion at an exchange rate of N1,400 to the dollar would amount to about N21 trillion annually.

“That’s for the purpose of argument, to say that today’s exchange rate is perhaps N1,400 to a dollar. If you change $15 billion at N1,400 to a dollar, it will be about N21 trillion. That’s what Nigeria would have spent, subsidised,” he said.

The minister defended the removal of petrol subsidy, saying the Petroleum Industry Act (PIA) 2021, provides that petroleum products should be priced under free market conditions at both wholesale and retail levels.

He said the decision by President Bola Tinubu to remove the subsidy was therefore in line with existing law, describing it as difficult and painful but necessary. He warned that retaining the subsidy could have pushed Nigeria into a situation similar to that of Venezuela, despite the South American country’s huge crude oil reserves.

The minister dismissed former Vice President Atiku Abubakar’s proposal for a production subsidy on petrol refined locally, arguing that the plan has no legal, fiscal or financial basis.

Lokpobiri described Atiku’s position as political and maintained that petrol pricing in Nigeria was now governed by the free-market provisions of the PIA. He said the legislation provided for petroleum products to be sold under market forces, adding that the government could not simply return to the subsidy regime that had been dismantled under President Bola Tinubu.

“So, whatever Atiku is saying is simply political. And Nigerians shouldn’t take him seriously,” Lokpobiri maintained.

Atiku had argued that because Nigeria produces the crude oil and now has significant domestic refining capacity, including the Dangote refinery, Nigerians should be able to benefit from cheaper locally refined petrol through a production subsidy.

Asked where the savings from subsidy removal had gone, Lokpobiri said the funds were reflected in increased allocations to the three tiers of government through the Federation Account Allocation Committee (FAAC).

“When, at the end of every month, the FAAC is convened, these days we get N2.3 trillion, N2.1 trillion. This is the first time it has happened,” he said.

He added that many state governments had previously struggled to pay salaries but were now undertaking major projects, attributing the improvement partly to the savings from subsidy removal.

Lokpobiri also categorically denied that the federal government was still paying or reimbursing any subsidy, either directly or through the NNPC.

The minister also argued that deregulation had created opportunities for private investment in the petroleum industry, including refining, and cited the Dangote Refinery as an example. He said the refinery would not have been as attractive to investors if the government had continued importing petroleum products and selling them below market prices.

“Deregulation all over the world is to enable private sector businesses to thrive, and all the businesses that are associated with the oil and gas sector,” he said.

On the rising price of petrol, which he acknowledged was placing pressure on Nigerians, Lokpobiri maintained that the government could not arbitrarily reduce or increase pump prices because the market had been deregulated.

He said crude oil was a global commodity and that international crude prices affected the cost of refined petroleum products. “Crude oil is a global commodity. And the price is global,” he said.

The minister also rejected the argument that the availability of the Dangote Refinery should automatically result in lower petrol prices, saying the refinery still operated within the global crude oil pricing system.

On crude oil production, Lokpobiri said Nigeria was currently producing an average of about 1.8 million barrels per day, including condensate, compared with less than one million barrels per day when the Tinubu administration came into office.

He said production could rise above two million barrels per day but identified evacuation infrastructure as a major constraint.

“Most of our pipelines have been there for 50 years,” he said, explaining that increased production from re-entry into old wells was sometimes constrained by the inability to evacuate additional crude.

He said the relevant regulatory agency was working on a gradual replacement of the pipelines, which he expected would improve production in the coming years.

The minister also disclosed that more than 500 shut-in wells were associated with the divestment from Shell to Renaissance and another set of more than 500 wells followed the divestment involving ExxonMobil and Seplat.

He said the companies were undertaking re-entry programmes to restore production from the wells.

On the performance of the petroleum sector under the Tinubu administration, Lokpobiri said the government had attracted billions of dollars in investments and cited several projects either underway or approaching final investment decisions.

He listed Bonga, Bonga Southwest, Zaba Zaba, Obeta, Project Panther and Usan among the projects he said were progressing. He also said gas production had increased to more than 7.5 billion cubic feet per day.

On the country’s four state-owned refineries, however, Lokpobiri acknowledged that the facilities were not currently producing. He said the Port Harcourt, Warri and Kaduna refineries were not producing and that new partnerships, including with Chinese companies, were being negotiated to rehabilitate the facilities.

On the Port Harcourt refinery rehabilitation, which involved about $1.5 billion, he said approximately $1.4 billion had been spent before he assumed office and that the expenditure was undertaken by the NNPC rather than his ministry.

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