Fuel subsidy and 2015 budget

 “There is a provision for subsidy in the budget; people need to understand where to look for an issue. If you look at the main appropriation, there are so many cost components,” Makarfi was quoted as saying.“You will not see cash calls in the main appropriation, you will not see subsidy in the main appropriation. […]

 “There is a provision for subsidy in the budget; people need to understand where to look for an issue. If you look at the main appropriation, there are so many cost components,” Makarfi was quoted as saying.
“You will not see cash calls in the main appropriation, you will not see subsidy in the main appropriation. There are expenses in the main memoranda, items that you are not going to see in the main appropriation,” he added.
 “For you to see them, you have to go through the revenue profile. In this year’s budget, N100 billion was provided for Premium Motor Spirit, N43 billion for DPK (kerosene),” he explained.
Why Makarfi’s intervention has made little impression is that Nigerians have come to see subsidy as the only benefit they derive from the country’s vast oil wealth. The amount provided for the purpose is short of the about one trillion naira that the government claims it spends on subsidy annually. It may be left for the new administration taking office at the end of this month, if it wishes, to continue the subsidy at current levels through a supplementary budget.
In 2013, the government budgeted N970 billion for fuel subsidy, out of which N515 billion was released to oil marketers. In the 2014 budget, a similar amount was budgeted for subsidy, while N414 billion was released to oil marketers.
In spite of the huge sums spent on subsidy, the impact is hardly felt by the vast majority of Nigerians as petrol and kerosene do not sell at the official prices, even in the Niger Delta where the bulk of Nigeria’s oil output is produced.
Indeed, some have come to view the subsidy regime as a huge racket that benefits only a handful of officials and their cronies. Subsidy, which should be an indirect way of wealth redistribution to the impoverished majority, has over the decades failed to achieve that objective.
The opaque accounting system means that the actual amount the government pays on subsidy is shrouded in secrecy, and the $6 billion per annum claim has never been conclusively verified.
Even the government’s data on Nigeria’s fuel imports and domestic consumption has been a subject of intense dispute, just as there is no verifiable information backing subsidy approvals.
 The fuel consumption pattern is flat, going by the government’s figure; same subsidy amount is approved throughout the year, without regard to changes in consumer behaviour.
The president-elect, General Muhammadu Buhari has already hinted at overhauling the country’s oil sector. How this would affect the current dependence on fuel imports and the subsidy management that goes with it remains to be seen. But such overhaul should be comprehensive.  Nigeria is the only oil producing country that imports virtually all of its needs in refined petroleum products, sometimes even from non-oil producers!
Scrapping subsidy and the full deregulation of the downstream sector of the oil industry will make it more efficient and end the perennial petrol crisis that cripples the nation’s economic activities. The cycle of shortages can partly be blamed on discrepancies in subsidy payments and the delay in the passage of the Petroleum Industry Bill (PIB).
Encouraging investment in downstream, freeing more funds for investment, increasing local refining output, cutting fuel importation and saving on foreign exchange earnings could be some of the gains of scrapping subsidy.  Whatever the government plans, the possible social costs that may result could be alleviated through ramped up investments in the power, road, rail, healthcare and other vital national infrastructure.