Nigeria’s Ambassador to the United States, Prof. Adebowale Adefuye, says fuel subsidy discourages competition and stifles private investment in the downstream sector.

“Due to the lack of deregulation, investors have shied away from investing in the development of refineries, petro-chemicals and fertiliser plants,’’ Adefuye said at a special town hall meeting with Nigerians in Chicago on Saturday.

Our North America Correspondent reports that the meeting was convened to discuss issues relating to the fundamentalist, Boko Haram sect and fuel subsidy removal.

Adefuye noted that subsidy encouraged smuggling of petroleum products across the borders to neighbouring countries where prices were higher.

“Continuing with the fuel subsidy system will pose a serious danger to the economic survival of the country.

“With 72 per cent of the country’s budget being spent on recurrent expenditure, there will come a time when there will be no money available for capital projects.

“We would then have to say goodbye to plans to improve power supply, repair our roads, rebuild our railways, improve the quality of our education and attain the objectives of our Vision 20:2020.’’

The envoy noted that in 2011, fuel subsidy was more than the aggregate sectoral allocation for education, health, power, agriculture and rural development as well as water resources.

He equally observed that from 2006 to 2011, more than N3.7 trillion was spent on subsidy and in 2011, N1.348 trillion was spent between January and October while N1.436 trillion was spent at the end of the year.

“This represents 30 per cent of total Federal Government’s expenditure, 118 per cent of the capital budget and 4.18 per cent of the Gross Domestic Product.’’

Adefuye said the government had to borrow N52 billion in 2011 to finance its deficit.

He said that subsidy was no longer economically sustainable as it was increasing in leaps and bounds, fuelled by corruption.

“In 1999, N600 billion went into subsidy; in 2010, it was N800 billion and in 2011, N1.3 trillion. This means that it would reach a stage when nearly the entire federal budget would be diverted to fuel subsidy alone.

“What is even more annoying is that the subsidy regime has been captured by the ‘fat cats’ in the oil cartel of about hundred oil companies owned by some of the richest Nigerians.

“These are some of the people suspected to be encouraging and sponsoring some elements in the current civil strife.’’

The ambassador added that removal of fuel subsidy would mean right pricing of fuel in Nigeria and would attract foreign investment in the downstream sector of the oil and gas industry.

“It will attract foreign investments for the establishment of private sector refineries, petrochemical plants and it will enable companies issued licences to establish projects and create job opportunities for the youth and ensure technology transfer.

“In fact, the estimate is that in a few years, not less than 750,000 direct and related jobs would be created on account of this.

“With fuel subsidy removed, three Green Refineries already in the pipeline with a total production capacity of 300,000 barrels per day will be speedily established.

“There will be more money to effect turnaround maintenance of the existing refineries in Kaduna, Warri and Port Harcourt to ensure maximum production.’’