Nigeria must find a sustainable solution to the removal of PMS subsidy, to avoid severe implications for the manufacturing industry, GDP, and unemployment.
Nigeria’s premium motor spirit subsidy has existed in two forms – the first being the payment of the difference in the actual pump price of PMS, which is arrived at after calculating the landing cost and the extant margins.Although the debate on the removal of subsidy has many sides, Nigeria needs to tread a sustainable path and find a lasting solution to the many implications of the removal. KINGSLEY JEREMIAH, in this report, examines the issues.
The development has forced Nigerians to find their balance and confront this reality amidst high unemployment, ravaging poverty, inflation, dismal purchasing power and an existing energy crisis. While the calls for the removal process to be humane to avoid unbearable shock to the economy is sacrosanct, for decades, Nigeria’s petroleum industry has contributed abysmally to the gross domestic product as the contribution in 2022 stood at 5.67 per cent compared to 7.
The report further pointed out that subsidy payments more than doubled in 2008 and 2010 and witnessed the highest increase ever in 2011 to $13.52 billion . A sharp decline was witnessed in 2012, 2013, 2014 and 2015 when it dropped to $3.336 billion in 2012. The decline in subsidy expenditure continued in 2016 and 2017 to as low as $473 million in 2017.The reduction was short-lived as the payments skyrocketed to over $3.88 billion in 2018 and 2021 to $3.575 billion .
As the government engages with labour, most stakeholders have insisted that proper planning of the aftermath of subsidy is not only critical for the country but necessary to bring in local and foreign direct investment into the sector. The NMDPRA chief also revealed that the Federal Government has officially scrapped petroleum equalisation as well as the national transport allowance.
According to him, the shocks on citizens were enormous as well but the pain is the inevitable cost of reforms. “Such measures should focus on reducing the cost of food, provision of cheaper public transportation options, improving power supply to reduce demand for fuel for electricity generators, incentives to promote the use of autogas, reduction in import tariffs for intermediate products for food processing companies, eliminating taxes and levies on all agricultural inputs to boost food production and reduction in import tariffs on mass transit buses, among others.
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