‘Unchecked Oil Theft, Petrol Subsidy, Debt Servicing Will Push Nigeria into Bankruptcy’

Dike Onwuamaeze

An Economist and Founder of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, has warned the federal government that unchecked crude oil theft, sustenance of petrol subsidy at its current rate and debt servicing would wipe out the government’s expected revenue of N10.7 trillion in 2022 and plunge the country into bankruptcy.

Yusuf also tasked the government to pull the country’s economy from the brink by addressing the challenges posed by economic headwinds experienced in the first quarter of 2022, which included rising insecurity, escalating energy cost and worsening exchange.  

He sounded the warning yesterday during a quarterly press conference on the economy that was hosted by the CPPE in Ikeja, Lagos State, where he said that “with current subsidy trajectory, subsidy cost would not be less than N4 trillion by the end of this year.  This is clearly a major source of disruption and dislocation for the finances of government at all levels.”

He added that “unbridled pipeline vandalisation, illegal refineries, oil theft, attacks on oil installations among others” were threat to the economic survival of the nation and urged the government “to take urgent steps to pull the economy from the brink.”

Yusuf also commented on the implication of sustaining the current petrol subsidy on the economy. “We will see an increase in subsidy payment as the landing cost of petrol increases. Regrettably, we remain a major importer of petroleum products.  Therefore, when oil prices increase, subsidy payment also surges. Only recently the estimate of subsidy was put at N3 trillion by the NNPC.  That was before the Russian invasion of Ukraine.  

“The story would have changed now.  We should expect subsidy payment to exceed the N3 trillion by the end of the year, depending on how long the sanctions and invasion lasts. This of course has very serious implications for our budget and government finances.

“If crude oil price remains at current levels, and the PMS price remains fixed, the country may be teetering on the brink of bankruptcy. Current subsidy payment regime is simply not sustainable. The deregulation dialogue needs to urgently resume to save the economy from further deterioration,” he said.

He regretted that Nigeria’s dysfunctional policy and regulatory environment in the oil and gas sector have been denying the country the benefits of rising crude oil prices in the international market. “This is why the surge in crude oil price, rather than be a blessing, penalises the Nigeria economy. This is the paradox we are confronted with. This is because of the inherent higher subsidy cost.  This would escalate the fiscal deficit and increase public debt, which will translate to increased borrowing,” he said.