Harsh details of what may become of Nigeria’s economic situation if her government continues to subsidise importation of petroleum products under the Petroleum Support Fund (PSF) scheme were at the weekend revealed by the International Institute for Petroleum, Energy Law and Policy (IIPELP).

IIPELP, a think-tank that provides institutional and structural support to the energy sector in Africa and Nigeria warned that the country stands the risk of bankruptcy in a matter of months if it continues to regulate domestic price and consumption of petrol by her citizens.

Speaking on the backdrop of the country’s dysfunctional downstream petroleum sector, continuous dip in crude oil prices and revenue accruable to the country from therein, as well as the country’s diverse trials in her upstream crude oil operations, IIPELP’s President, Prof. Niyi Ayoola-Daniel told THISDAY in an exclusive interview that sustaining the subsidy scheme would be a tough call on the incoming government of Muhammadu Buhari. Ayoola-Daniel’s warning came at a time when a 2012 audit report of activities in Nigeria’s oil and gas sector conducted and published by the Nigeria Extractive Industries Transparency Initiative (NEITI) has recommended that the country’s four legacy refineries in Port Harcourt, Warri and Kaduna be privatised immediately to cut short her losses from them.

“When people queue at filling stations for two days to buy fuel, you have effectively taken out their sources of livelihood because those days are wasted. If subsidy continues, it can shut down Nigeria’s economy because we cannot continue to subsidise such consumption to the detriment of our economy,” Ayoola-Daniel said in response to a question on the status of Nigeria’s downstream petroleum sector. He further said:
“This game of subsidy has been a political one and has not been played on the rings of economic data, neither is it fact-driven. It is emotionally driven and politically played by those people that use it as a political tool and we cannot continue like this.”
“Government will have to stay clear of the downstream petroleum sector because it can run itself but when government decides to interfere, it creates dysfunctionality in that the subsidy regime is a key problem to the sector.  Subsidy is strangulating free market enterprise and when government does not fix the price of the primary product which is crude oil, how then does it intend to fix the price of the by-products.

When government does not allow the downstream sector to operate in a commercial framework that allows for healthy competition as seen in the telecoms sector, there will continue to be queues at our filling stations,” added the IIPELP president.

While puncturing arguments that petrol subsidy has been a pro-poor policy, Ayoola-Daniel said: “The arguments mostly proposed in support of subsidy and which is always at the heart of its continuation is that it is pro-poor, it may be a fair one but as long as there are long queues in our filling stations, then we are compounding the problems of the poor because the real beneficiaries of the subsidy are not the poor at all but the middlemen and rent seekers.”