Subsidy Creates Distortion in the Economy – Kachikwu

The Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Dr Emmanuel Kachikwu and other key stakeholders in the Oil Sector have argued that because subsidy creates distortion in the economy, it cannot be sustained.

Kachikwu said this while presenting a keynote address titled “Energy Crisis and Sustainable Development in Nigeria: The Way Forward”, at the National Association of Energy Correspondents (NAEC) Conference held at the Eko Hotel & Suites, Victoria Island, Lagos.

He was represented by Mrs Bolanle Ashafa, Acting Managing Director of Nigeria Engineering and Technical Company (NETCO).
He said “Subsidy creates distortion in government revenue distribution as a result of round-tripping and unnecessary carryover of expenditures every year in a way that is difficult for government to control or sustain.

“Subsidy accounted for 20 per cent of the federal government budget in 2013. Implementation of the policy will entrench efficiency in product usage, product availability and effective competition among investors, hence ending products shortage.

“However, critical enablers such as security of supply and distribution infrastructure must be assured to guarantee the availability of the petroleum products at affordable prices.

“Removal of price control mechanisms is deemed imperative to ensure full growth of the sub-sector, by allowing private stakeholders to complement the effort of government in developing the industry.

“We will focus on the need to address infrastructure constraints, to ensure sustainability of gas and petroleum products supply and distribution nationwide. We will be tackling infrastructure gaps and promoting inclusive growth, as well as capacity building.”

Chairman, Managing Director, Mobil oil Nigeria plc, Mr. Tunji Oyebanji also added that “a sustainable downstream sector would liberalize pricing, produce large scale investments, competitive landscape, create technology tools (that involves pricing, control systems), support services, making NNPC an effective competitor and not a regulator, ensuring safer trucking and operations, encourages anti-monopoly legislation, consumer protection and product quality.”