Nigeria seeks to ease petrol woes despite cash crunch
Nigeria on Thursday said it had made a subsidy payment of 156 billion naira ($787 million, 705 million euros) to fuel vendors to ease a crippling petrol shortage that has wreaked havoc nationwide.
Finance Minister Ngozi Okonjo-Iweala said the vendors were still owed an additional 98 billion naira but warned government revenue remained under intense pressure because of low crude prices.
“The Federal Government has made maximum effort, in spite of the well-known fact that the fall in oil prices has significantly reduced national revenues, to prioritise (subsidy) payments,” Okonjo-Iweala said.
The petrol subsidy scheme is one of the most controversial elements in the federal budget of Nigeria, which is Africa’s leading economy and top oil producer.
Many, including the finance minister herself, want the scheme scrapped entirely.
Currently, petrol vendors must sell fuel at 87 naira per litre — far below international market rates — with their losses offset through the subsidy.
When the government does not pay, fuel runs scarce, causing gridlock and panic.
In the economic capital, Lagos, this week, long queues have formed outside petrol stations, causing traffic gridlock.
A massive and unruly crowd formed outside a petrol station in the Lagos neighbourhood of Oworonshoki on Wednesday, with dozens of people clutching jerry cans at the gate, hoping to purchase even just a few litres of fuel.
Okonjo-Iweala urged vendors to show understanding because of the revenue crunch by continuing to stock their stations so that “Nigerians… should not suffer more”.
– Paltry refining capacity –
Despite producing roughly two million barrels of crude oil per day, Nigeria is regularly hit by fuel shortages because of its paltry domestic refining capacity.
Locally produced crude is shipped abroad for refining and then imported for sale.
Observers unanimously agree the process has been devastating, with billions of dollars wasted over decades in subsidy payments that do little to benefit the economy.
The programme, however, has some popular support as many Nigerians see low petrol prices as their only benefit from the nation’s vast resource wealth, which has largely been squandered through corruption.
Repeated calls to invest in domestic refineries have so far yielded little progress but Nigerian business tycoon Aliko Dangote, Africa’s richest person, has vowed to lead the effort.
A 2015 budget approved on Tuesday by federal lawmakers included no additional funds for subsidy payments, marking a significant departure from past budgets.
But the measure may prove meaningless, as president-elect Muhammadu Buhari and his loyalists in the national assembly can push through amendments once the new government is sworn in on May 29.
Okojo-Iweala’s comments also highlighted a key challenge facing Buhari as he readies to take office.
Dwindling revenues will almost certainly affect his ability to make promised improvements in infrastructure and security.
After failing to adequately save when crude prices were above $100 dollars per barrel, Nigeria’s oil-dependent economy has been hammered by the global oil price shock since mid-2014.
Crude prices were hovering close to $60 per barrel on Thursday.
No Comments yet