KPMG: UNDERPERFORMANCE OF OIL REVENUES POSES RISKS TO FISCAL HEALTH

being a significant oil producer, with even more abundant natural gas endowments, Nigeria earns significantly less oil revenues than it used to due to lower crude oil production and lower non-oil revenues. Nigeria suffers a huge contradiction; it is an oil producer that continues to earn less oil revenues in times of higher oil prices.

“This due primarily to supplyside challenges of significant theft of crude oil through oil bunkering by organised criminal elements, the knock-on effect of declining investments in oil and gas exploration and development by both local and international oil companies, as well as sustained insecurity and other risks in terms of operating in oil-rich geographies principally in the South-South region of the country.”

Nonetheless, Kale noted that the removal of petrol remained a complex issue that required careful consideration of its potential economic, social, and political impacts.

He said while subsidies have provided some benefits, they have also been a significant drain on the country’s resources and have contributed to inefficiencies and corruption.

Among other things, the KPMG Partner said, “In addition to demonstrating very clear and unambiguous transparency in the process, the government will also have to demonstrate that as much as it is rightly asking the public to tighten its belt and expect temporal inconveniences, it also must be seen to be cutting wasteful expenditure and reduce the rising costs of running government including the courage and political will needed to fully implement the Orosanye report which is estimated to save the government N1.3 trillion.”

He said with careful planning and implementation, the removal of PMS fuel subsidies in Nigeria has the potential to promote greater economic efficiency, reduce corruption, and create opportunities for more sustainable and inclusive economic growth.