President Muhammadu Buhari who says he still does not understand it when people call for subsidy removal, will immediately pay overdue subsidies of N407 billion ($2.06 billion) to fuel marketers to end shortages at gasoline pumps, the finance ministry said.
Buhari directed finance minister, Kemi Adeosun, to pay the subsidies “to bring to a quick end to the lingering fuel crisis which has caused great suffering to Nigerian families and businesses,” Marshall Gundu, an Abuja-based spokesman for the ministry, said in an e-mailed statement on Wednesday, according to Bloomberg reports.
The payment covers arrears from 2014 and this year and further details will be published in national newspapers, Gundu said.
Pumps ran dry across Nigeria last month after marketers said they needed to be paid the subsidies before they could re-stock. The government caps gasoline prices at N87 a liter. Buhari has ruled out scrapping subsidies for now, despite the finances of Africa’s biggest oil producer being ravaged by crude prices falling to around $40 a barrel from $125 around 18 months ago.
Fuel subsidies cost the country $35 billion between 2010 and 2014 and have mainly benefited wealthy Nigerians, who buy more fuel than the poor, the World Bank said in a report on Tuesday.
“The benefits of the fuel subsidy in Nigeria appear quite limited, while the costs are high,” according to the World Bank report.
Surprisingly, Buhari continues to dither on the matter, despite his transiting committee suggesting to him in clear terms that Nigeria cannot afford to retain the wasteful subsidy regime.
BusinessDay learnt yesterday that the current figure of N407bn represents debt as at September and by the end of this month, another huge bill of almost equal value will become due for settlement by government.
According to the CEO of a major marketing company, “this figure does not cover the interest and FX differentials arising from delays in payment by government. So whichever you look at it, while there may have been some fraudulent claimants, the government is messing up the downstream industry because there are honest and legitimate businesses that are being jeopardised.”
