An African think-tank, the International Institute for Petroleum, Energy Law and Policy, IIPELP, has warned that bankruptcy is staring Nigeria in the face if it continues to subsidize importation of petroleum products under the Petroleum Support Fund, PSF, scheme.

The body which provides institutional and structural support to the energy sector in Africa warned that the nation could become insolvent in a matter of months if the country continues to regulate domestic price and consumption of petrol by her citizens.

President of IIPELP, Prof. Niyi Ayoola-Daniel, told ThisDay that the incoming administration of General Muhammadu Buhari will find it difficult to sustain the scheme.

According to him, “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.

“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,” the IIPELP president stated. 

While faulting arguments in support of fuel subsidy on the basis that it is pro-poor, 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.”