Alake questions how proposed production subsidy would operate under Petroleum Industry Act

By Zaharaddeen Ishaq Abubakar | Katsina Times

The All Progressives Congress Presidential Campaign Council (APC-PCC) has asked former Vice-President and African Democratic Congress (ADC) presidential candidate, Atiku Abubakar, to explain the legal, fiscal and operational framework of his proposed production subsidy for locally refined petrol.

The council's spokesperson, Dele Alake, made the demand in a statement on Sunday, following Atiku's reiteration of the proposal at a press conference in Abuja on Friday.

Atiku has proposed a production subsidy for petroleum products refined locally, saying the measure would help reduce production costs and ultimately lower petrol prices for consumers. He has also called for reductions in the prices of petrol and diesel.

However, Alake said the proposal raised questions about its compatibility with the Petroleum Industry Act (PIA) 2021, its fiscal implications and how the government would ensure that any subsidy given to refiners translated into lower pump prices.

He cited Section 205(1) of the PIA, which provides that wholesale and retail prices of petroleum products should be based on unrestricted free-market pricing conditions.

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The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) also said recently that it does not fix petrol pump prices or issue administrative pricing templates, except where statutory conditions for intervention are met. The regulator said no market failure had been declared.

Alake therefore asked Atiku to clarify whether refineries receiving the proposed subsidy would be required to sell petrol at a government-prescribed price.

He said if the answer was affirmative, Atiku should identify the legal framework that would empower the government to impose such a condition and explain how it would operate within the provisions of the PIA.

According to Alake, if refiners would not be required to sell at a prescribed price, Atiku should explain the mechanism through which government support would guarantee lower prices at filling stations.

He argued that without an enforceable mechanism, refiners could receive government support while consumers continued to pay prevailing market prices.

The APC-PCC also called for details of the proposed subsidy rate, its funding source, spending limits and safeguards against diversion and fraudulent claims.