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Outrage As FG Admits Paying Fuel Subsidy After Removal

Outrage on Thursday greeted fresh revelations on how the Fed­eral Government has been secretly running a subsidy regime re­garding petroleum products when the Group Managing Director of Nigerian Na­tional Petroleum Corpora­tion (NNPC), Mele Kyari, disclosed that the adminis­tration currently subsidises the cost of premium motor spirit (PMS), also known as fuel, with about N120 billion ($263,248 million) monthly.

Kyari stated this during the weekly media briefing organised by the Presiden­tial Communication Team at the State House, Abuja.

It would be recalled that Minister of Finance, Bud­get and National Planning, Zainab Ahmed, had on Jan­uary 12 during a virtual public presentation of the breakdown and highlights of 2021 Appropriation Act in Abuja said, “We are not bringing back fuel subsidy. We didn’t make provision for fuel subsidy in the bud­get.

The impact of what was done was reducing some of the cost components that were within the template. And also related to it, on matters of electricity sub­sidies, no provisions have been made for subsidy for fuel and no provisions have been made for subsidy for electricity.”

According to the GMD, the NNPC has been absorb­ing the cost differential which is detailed in its finan­cial statements.Kyari further explained that while the actual cost of importation and han­dling charges amounted to N234 per litre, the govern­ment was selling at N162 per litre.He, however, said the NNPC could no longer afford to bear the cost, adding that sooner or later Nigerians would have to pay the actual cost for the commodity.

Kyari, who avoided call­ing the payment a subsidy, said the NNPC pays be­tween N100 and N120 billion a month to keep the pump price at the current levels, insisting that market forces must be allowed to deter­mine the pump price of pet­rol in the country.

“Our current consump­tion is— evacuation from our depots is about 60 mil­lion litres per day.We are selling at N162 per litre. Current market price is N234.”

“This is a simple arrange­ment you do. If you want ex­act figures from our book, I do not have it at this moment but it’s between N100 billion and N120 billion per month.We are putting the differ­ence in the books of NNPC and we cannot continue to bear it.”

“Today, NNPC is the sole importer of PMS. We are im­porting at market price and we are selling at N162 per litre today.Looking at the current market situation, the ac­tual price could have been around N211 that you men­tioned and around N234 to the litre.The meaning of this is that consumers are not pay­ing for the full value of the PMS that we are consuming and, therefore, somebody is bearing that cost.

“As we speak today, the difference is being carried in the books of the NNPC and I can confirm to you that NNPC may no longer be in a position to carry that burden because we cannot continue to carry it in our books.

“That is why early last year, the full deregulation of the PSM market was an­nounced and we have fol­lowed this through, until we got to September when oil prices shifted above N145, some social issues came up, particularly with trade unions and civil societies leading to an engagement between us and organised labour which prevented the eventual implementation of the actual price of petroleum products at that time.

“Those engagements are continuing and the objec­tives of those engagements is actually not to prevent deregulation but make sure that there is sufficient frame­work on ground to ensure that consumers pay for the actual price of this product and they are not exploited.”

The Minister of State for Petroleum Resources, Timi­pre Sylva, who also spoke at the event, expressed the hope that the Petroleum Industry Bill (PIB) would be passed into law in April.

According to him, frantic efforts are being made by the legislators to complete work on the bill and pass it, in line with the aspirations of critical stakeholders in the petroleum sector.

“The National Assembly has expressed the intent to pass the PIB into law by April 2021, every effort is being made to support the National Assembly to meet this target,” he said.While enumerating the gains of the PIB to Nige­rians, the minister said it would create additional in­frastructure across petro­leum value chain.

He added that it would in­crease petroleum activities as well as enhance the live­lihood of inhabitants of oil producing communities.He said the bill would cre­ate additional infrastructure across the petroleum value chain especially from mid-stream and down-stream.

He added that critical in­frastructure would also be developed, while utilising the incremental revenue from increased petroleum activities.Sylva said it would also provide additional infra­structure in the host com­munities arising from the host community trust.

The minister further stated that more businesses would be set up to support increased activities within the petroleum value chain. “Greater confidence would be engendered with certainty in the petroleum industry, which will lead to increased investments.

“Nigeria will occupy its place among comity of na­tions who have updated their petroleum industry laws in line with current realities.The bill will also enable a structured monetisation of fossil fuel resources be­fore the whole world turns to renewables.”

Nigerians Fault Buhari Over N120bn On Fuel Subsidy

Meanwhile, Nigerians on Thursday took a swipe at the Federal Government over its claims that the country spends N120 billion month­ly to subsidise the consump­tion of fuel in the country.

They said the Buhari gov­ernment earlier claimed it had removed subsidy from the consumption of fuel and wondered how the govern­ment arrived at the bogus figure on subsidy without value addition on the lives of Nigerians.

Former presidential aspi­rant under the National Con­science Party (NCP), Chief Martin Onovo, implored Ni­gerians not to trust the cur­rent administration with the latest subsidy figure as well as its intent to use $1.5 billion to rehabilitate the nation’s Port Harcourt Refinery.

He told Daily Independent that the solution to the fuel subsidy debacle was for the Federal Government to ho­listically boost domestic re­fining, but expressed doubt over the capacity and com­petence of the incumbent government to drive the ini­tiative in the oil sector.

Muda Yussuf, the Direc­tor-General of the Lagos Chamber of Commerce and Industry (LCCI), told Daily Independent that increasing the burden of petroleum sub­sidy was an offshoot of the deregulation conundrum, which is a major cause for concern.

He said: “There are a number of critical issues that need to be aligned.We have the huge eco­nomic cost of petroleum subsidy and the inherent huge fiscal leakages which are clearly unsustainable.There is the social cost of the possible increase in petrol prices and the worry about possible backlash.”

“There is the adverse investment effect on the pe­troleum downstream sector resulting from policy uncer­tainty and inconsistencies.Private investors will be reluctant to invest in petro­leum refining if the subsidy regime persists.”

“The reality is that the de­regulation of the petroleum downstream sector is inev­itable if the economy must progress and put an end to the corruption that comes with the subsidy regime, but the policy transition needs to be strategically worked out.

“There could be a so­cial pricing window in the interim where petroleum products could be sold at a subsidised price.

“The NNPC stations could be so designated since they exist in all parts of the country.The government will have to provide a limited budget for this. The other players in the sector should thereafter be allowed to buy and sell according to the dic­tates of the market.

“We need to free the sector from the current suffocating regulatory framework. The economy has suffered ma­jor setbacks as a result of the over regulation of the sector.”

Timothy Olawale, the Di­rector-General of Nigeria Employers’ Consultative Association (NECA), said the huge subsidy borne on consumption of fuel in Nige­ria was unsustainable.

He told Daily Independent that there was no economic sense in Nigeria stewing in a budget deficit while it con­tinues to spend hugely on fuel subsidy.To him, the government should freeze fuel subsidy and begin the total dereg­ulation of the downstream sector of the nation’s petroleum industry.