Subsidy Removal: FAAC Calls For Full Deregulation Of Downstream Sector

The Federation Account Allocation Committee (FAAC) has called for full deregulation of operations in the country’s downstream petroleum sector ahead of the proposed removal of subsidy on petroleum products.

This was contained in a communique at the end of a three-day retreat to evaluate issues emanating from the Federation Account from January 2019 to September 2022.

The committee noted that fuel subsidy is unsustainable but pointed out that while removing fuel subsidy would improve government revenues, it would increase inflation, which would significantly impact low-income households by raising their cost of living.

“The downstream operations of the petroleum industry should be fully deregulated to provide for the removal of subsidy.

“Nigeria cannot continue to sustain the provision of subsidy on PMS because of the negative impact it has on the nation’s revenue. Accordingly, subsidies on PMS should be phased out.”

It advised that revenue proceeds accruing from subsidy removal should be used for the benefit of the entire population and should be put to projects having direct impact on the citizens such as Education, Healthcare, Skill acquisition among others.

The committee also expressed concerns about rising public debt, saying “The rising level of public debt and the increasing ratio of debt service to revenue is worrisome.”

It noted that the contribution of oil revenues to Federation account revenues had been challenged by structural constraints bedeviling the oil sector, including the unsustainable subsidy on petrol operating as the first line against gross oil revenues.

The committee, therefore, called for the reduction in the cost of governance, prudent management and transparency in all tiers of government.