Fossil Fuels Consumption Subsidies and Domestic Production in Nigeria By C.E Alozie (PhD, ESV (Registered Estate Surveyor & Valuer) FCA)

Abstract

Christopher Enyioma Alozie

This paper examined fossil fuels procurement and distribution; local production, lifting and gaps in demand and supply; and considered prior subsidies spend on future produce and import expenditure decision. Secondary data-sets used, were extracted exclusively from government’s sources that covered procurements (importation, local production and lifting) consumption, approved fiscal subsidies budgets and actual disbursements. Tools of analyses used are: numerical analysis; local production and imported volume of products ratios, make or buy (import) ratio analysis of the direct subsidies fiscal expenditures (repair-maintain-refine specie of cost efficient business model of turnaround maintenance business cost model with import decisions). Results confirm Nigeria significantly relied heavily on imported petroleum products for a greater proportion of her domestic consumption in the latter 16 years. Local refining productivity of fossil fuels as a source of products procurements from FGN refineries declined sharply the ratio of 1.01in the first 16 years (1989 -2004) down to 37.5% around 2012 and down to an average of 18 percent in the last eight years with zero output in 2020. Conversely, Nigeria’s direct subsidies fiscal expenditure increased steadily within these 32 years which amounts to about N15 trillion of which would have saved 50 percent of 25% of subsidies spends where 25% of N15 trillion on proper regular maintenance of refineries in first angle. Similarly, Nigeria would have more than 50% of subsidies disbursements. In conclusion, Nigeria’s our overdependence on importation necessitates such huge fiscal subsidies spends, which is also the root cause of on subsidies spending and wastage of public resources. Public resources disbursed for fiscal subsidies were more than enough to sustain proper turnaround maintenance of extant refinery and possibly finance building three of new additional refineries during the affected years. The paper concludes that Nigeria reliance on importation for 85- 90% of her fuels consumption; lack of proper routine maintenance of extant local refineries, production inefficiencies as well as grossly mismanagement of the daily domestic crude-oil allocations were primarily responsible for the huge fiscal subsidies expenditure. Furthermore, Nigeria’s indulgence in fuels importation and negligence of local refineries is tantamount to creating employment in those other refined fuels producing countries and escalating unemployment in Nigeria and this trend should be reversed. As a result, government should sustain subsidization of fuel consumption spending until such a time; Nigeria is able to produce sufficient refined products locally for consumption and export part thereof.

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