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‘Nigeria has been borrowing to pay subsidy on PMS’

Former Commissioner for Finance in Imo State, Prof. Uche Uwaleke has said the deregulation of the downstream petroleum sector and removal of petroleum subsidy by the Federal Government will benefit the ordinary Nigerian.

He added that the government could no longer continue to borrow money to fund the subsidy regime.

Uwaleke, who spoke at a technical session on the Nigeria oil and gas sector for members of the House of Representatives Press Corp, said over the years, the government has continued to pay for the difference in the cost of importing refined petroleum products and the cost marketers are expected to sell the product.

He lamented that about 99 percent of Premium Motor Spirit (PMS) consumed in the country in 1999 was imported, adding that with the rise of the exchange rate of the dollar, an increase in the prices of crude oil in the international market leads to an increase in pump price.

He said further that with the price of petrol higher in neighbouring West African countries than in Nigeria, the majority of the product imported and subsidised by the government end up being smuggled out of the country.

He argued that as a result of payment of subsidy on imported petrol, the NNPC is allowed by the government to deduct the cost of subsidy from the revenue accruing from crude oil sale, which he said, has led to lack of transparency in the management of the sector over the years.

He said: “The government can no longer carry the burden of subsidy because it makes no sense to continue to borrow to pay for subsidy. Otherwise, we will get to a situation where we can no longer service our debt.”

He stressed that it was wrong for the government to continue to borrow to finance recurrent expenditure in disregard to the Fiscal Responsibility Act, which states that when you borrow, you should borrow on a long- term and to fund capital project.

Noting Nigeria’s rising debts, Uwaleke said the country has not been able to service its debt, adding that subsidy on PMS has contributed to the nation’s debt burden.

He said: “Since 2017, subsidy now feature as a cost item, classified as under recovery,’’ adding that the decision of the government to remove subsidy would curtail smuggling and free alot of money for the government for fund capital projects.