The Nigerian National Petroleum Corporation (NNPC) has advised the Federal Government on the need to stop the payment of subsidy on petrol because it cannot be sustained.
Subsidy is the difference between the Expected Open Market Price of fuel and the actual or retail price that is paid by consumers for the product at petrol filling stations as regulated by the Department of Petroleum Resources (DPR).
The corporation’s Group Executive Director, Corporate Strategy and Planning, Dr. Timothy Okon, speaking at the 2015 Oloibiri Lecture Series and Energy Forum organised by the Society of Petroleum Engineers (SPE) in Abuja, on Thursday, explained that “since government does not control the prices of crude oil, its fluctuation often creates fiscal instability in the country, a situation that impacts negatively on Nigeria’s revenue”.
NNPC had, recently, admitted the knowledge of the massive nationwide protests and industrial actions by pressure groups in January, 2012, when the Federal Government announced the complete withdrawal of subsidy on petrol, the corporation, however, maintained that the continued payment of subsidy was not sustainable.
He noted that when crude oil prices came down to about $40 per barrel, subsidy was not paid during that period, as the landing cost of the product was either equal or even lower than its market value.
Okon explained that “subsidy on petrol creates uneven distribution of revenue, round-tripping and unnecessary carry-over of funds from one year to another, in a manner that is difficult to control by the Federal Government.
“So, from the technical analysis made, it is obvious that subsidy is real. And from our analysis, we look at it as something that should go because it is not sustainable,” he reiterated.