A former acting group executive director of the NNPC, Dr Tim Okon, has said Nigeria spent an estimated $35 billion as subsidy on petroleum products from 2010 to 2014, The Punch reports.
Dr Okon disclosed this at the 6th Emmanuel Egbogah Legacy Lecture Series with the theme, ‘Managing Petroleum Revenue under Volatile Price Dynamics’, organised by the Emerald Energy Institute, University of Port Harcourt, Rivers state yesterday, September 14.
Dr Okon said the subsidy programme was meant to help the poor but ended up benefiting a few wealthy people
Dr Okon who is currently a special adviser on fiscal strategy at the federal ministry of petroleum resources stated that the subsidy programme was actually designed for the poor but it ended up benefiting few rich persons.
His words: “In the period when Nigeria earned close to $300bn as revenue from oil, from 2010 to 2014, we were spending approximately $7bn annually on subsidy. Worse than this was that in spite of the huge revenue inflows, we were also borrowing.
“If we continue to borrow, we will be returning to the point where we may seek debt forgiveness. This is why we are concerned about this development.”
Dr Okon hailed the halt in the subsidy regime and stated that the billions of dollars spent on subsidising petrol across the country would have been used to fix all the country’s refineries as well as build the Mambilla Power Plant, which he says has the capacity of generating about 3,000 megawatts of electricity.
“Of course, spending money on consumables versus having productive capacity is another issue. At one point in time, the subsidy programme was worth $7bn a year.
This, however, was despite the fact that the total cost of getting our refineries fixed was about $3bn. But the $7bn was spent through the exhaust fumes of our vehicles,” he said.
He however expressed worry that the current fall in crude prices had taken a huge toll on the Nigerian economy, adding that crude prices had fluctuated for decades since Nigeria had been in the oil business.
“Volatility is not new; commodity price changes are not new and, therefore, Nigeria ought to, having being an oil producer for quite some time, have an understanding of this cycle. But the question is, why is it now difficult?” he queried.
He advised the government to deal with the revenue governance framework, adding that one way was the ability to create adequate buffers.
His words: “Our failure to create enough buffers has resulted in the situation that we have found ourselves. The second approach for most countries who are oil producers is that when the prices are high, you have to save and that is the purpose of the Sovereign Wealth Fund.
“Nigeria’s SWF, the last time I checked, was about $1.2bn, while that of Saudi Arabia, when I last checked it up, had come down from $783bn to about $600bn.”
Dr Okon further said it was high time Nigeria diversified its revenue-generating sources. According to him, the country should also undertake resource diversification and the burden on the oil and gas industry should be reduced since it contributes only about 15 per cent to the Gross Domestic Product.
Meanwhile, Nigeria’s information minister, Alhaji Lai Mohammed, has stated that the fall in oil price in the country turned out to be a blessing.
He said the present administration has realized the huge potentials of the creative industry in stimulating economic growth and job creation as a way of cushioning the effect of the oil crisis.