Governors’ Verdict: Continuous payment of oil subsidy not sustainable

Governors under the auspices of the Nigeria Governors’ Forum (NGF), on Wednesday described as unsustainable, Nigeria National Petroleum Corporation (NNPC) continuous payment of oil subsidy to marketers.

“It is also important to highlight that subsidy remains a major drawback on government revenues. We may need to consider a new deal on how governments will absorb the cost of subsidy. This has become necessary given the new reality of low oil revenues and rising government commitments, said Chairman of the Forum Dr Kayode Fayemi, Governor of Ekiti State, who led a delegation of the NGF on a courtesy call on the new Group Managing Director of the Nigeria National Petroleum Corporation (NNPC) Mr Mele Kyari, solicited for greater prudence, accountability and transparency from the Corporation.

They further described it as a drain on the country.

“We believe that at the current course, subsidy costs will continue to offset any recovery in the oil market. The country recorded one of its lowest cost of subsidy in 2016 when oil traded at an average of US$48.11 pb. Total subsidy that year was around N28.6 billion; but the amount rose to N219 billion in 2017 and N345.5 billion by mid-2018, as the price of oil and domestic PMS consumption rebounded.These are important considerations for us, with direct implications on energy security and economic stability in the country.”

The NGF chairman said that having known Kyari, after meeting him while he was minister of Mines and Steel, and having worked with him and seen his perspectives and visions for the country, he believes that he is a man of integrity who would deliver on his promises to the nation.

He said: “Over the last few years, the Forum has built a working relationship with the corporation on matters related to the size and distribution of oil revenues in the country. Both organisations have held series of engagement meetings to discuss ways of addressing challenges bedeviling the oil industry.

“This partnership remains critical to us because it is integral to the fiscal stability of both the federal and sub-national governments, given the central role oil revenues play in funding our budgets.

The Nigerian National Petroleum Corporation (NNPC) also expressed its readiness to continuously work with the Nigerian Governors Forum (NGF) in order to grow crude oil production, renewable energy and generate more revenue for the country.

Group Managing Director, Mallam  Mele Kyari said the NNPC was ready to work for Nigerians through the efficient exploration and exploitation of the nation’s abundant hydrocarbon resources, noting that the NGF was an important and critical stakeholder to the successes of the corporation’s operations.

“It is our job to deliver value for the teeming population of this country. The NNPC has no excuse but to deliver on its mandate by touching the lives of Nigerians in many positive ways. We will ensure steady and unimpeded supply and distribution of petroleum products and we will also ensure that the NNPC remittances to the Federation Account Allocation Committee (FAAC) are enhanced,” Mallam Kyari assured.

He said NNPC’s operations would continue to drive the levers of production that would ensure steady generation of royalties and petroleum profit taxes from all its partners in the oil and gas value chain.

The NNPC’s helmsman stated that the corporation would work with the National Assembly and the NGF to ensure that appropriate legislations were put in place to guarantee a fiscal environment that would promote inflow of investment into the nation’s Petroleum Sector.

On transparency, Mallam Kyari assured that the financials and operations of the corporation would continue to be communicated to the NGF and that the NNPC would continue to engage the Forum to make the operations of the Oil and Gas Industry smooth in the country.

He said the NNPC would continue to work with the governors to enact appropriate legislations to mitigate incidences of pipeline vandalism, noting that adequate security of the corporation’s pipelines would go a long way to improving the nation’s revenue portfolio.

“We would promote partnership with the states in the area of renewable energy in line with our plan to transform into a competitive global integrated energy company,” Mallam Kyari said.