An Economist and Managing Director, Financial Derivatives Company (FDC) Limited, Bismarck Rewane, has predicted that the continued payment of petrol subsidy by the federal government will not encourage investors in the downstream oil and gas sector.
He stated that despite the Petroleum Industry Act (PIA), investors are more likely to divert their resources into n renewable and clean energy.
This is contained in his presentation at the monthly Lagos Business School’s (LBS) economic breakfast meeting for September 2021.
Rewane, who is a member of President Muhammadu Buhari’s Economic Advisory Council (EAC), said, “Implementation of the PIA to continue but subsidies will remain. Minimal impact on new investments in the downstream sector as investors’ transition towards investments in renewable and clean energy.”
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Although, deregulation of the downstream petroleum sector is among the provisions in the PIA, the federal government has ruled out immediate removal of petrol subsidy pending when an alternative to petrol is made available.
In his fiscal policy outlook, the economist stated that public finance deficit would remain in its N5.6 trillion for 2021, adding that oil revenue would be insufficient to meet the country’s expenditure needs.
He said, “Public finance to remain in deficit: Fiscal deficit = N5.6trn (2021). Oil revenue will be insufficient to meet expenditure needs. Tax revenue will be undermined by widespread evasion and a large informal sector
“FG’s debt burden to intensify as Ways & Means advances climb.”
Ahead of the next Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN) slated for September 20 and 21, 2021, Rewane predicted that the committee would likely bring down Monetary Policy Rate (MPR) commonly known as the benchmark interest rate by 0.5 percent to 11 percent.
