New fuel price necessary evil for Nigeria’s survival – FG
The minister who spoke yesterday during a media interactive with the Abuja based Editors and Bureau Chiefs of the nation’s media organisations, said the price increase was a “necessary evil” if the nation must survive. Among the benefits of the current fuel price regime, he said, is the total elimination of the perennial and persistent fuel scarcity by ensuring availability of the product across the country. He stated that it would reduce the incidence of hoarding, smuggling and diversion of the products substantially and stabilize price.
Lai Muhammed also stated that the measure was equally aimed at ensuring market stability and improvement in the fuel supply situation through private sector participation. He however explained that it would further create labour market stability, which in turn will “potentially create additional 200,000 jobs through new investments in refineries and retails and prevents potential loss of 400,000 jobs in existing investments”.
And to ensure that these benefits are fully achieved, the minister explained that government is therefore seeking the understanding of all Nigerians, and appealing to the organized labour to sheathe their sword and cooperate with the government to ensure full success of the new fuel price adjustment.
He said: “This is not the time for any action that will further worsen the economy. The situation is dire, not just in Nigeria but elsewhere around the world. For instance, the United Arab Emirates, the third-biggest oil producer in OPEC, has become the first country in the oil-rich Persian Gulf to remove transport fuel subsidies. In addition, the country has announced that with effect from 1 August, 2016, fuel prices will be deregulated. Also, in response to fiscal pressure caused by the fall in crude oil prices, OPEC’s top oil producer Saudi Arabia has announced a plan to raise fuel prices. You can now see that this is indeed a global problem.”
The minister pointed out that “we have no choice than to liberalize the price of petrol, if we are to end the crippling fuel scarcity that has enveloped the country, ensure the availability of the products and end the suffering of our people over the lingering scarcity“.
On the growing notion that the new petrol pump price regime amounts to a total withdrawal of the alleged existing fuel subsidy, the minister assured that there is no such subsidy removal by the President Muhammadu Buhari government. “No. There is no subsidy to remove because no provision was made for subsidy in the 2016 budget. Last year, the government paid out N1 trillion in subsidies, and that’s one sixth of this year’s budget. We can’t afford to pay another 1 trillion Naira in subsidy “.
On whether government is planning any palliatives in the wake of the new price regime, Muhammed said that the “entire 2016 Budget is packed with palliatives. Some 500,000 billion Naira has been set aside for social intervention that will touch the lives of millions of Nigerians and lift millions more out of poverty “.
Some of the palliative intervention measures as listed in this year’s budget by government, according to the minister, includes: the 500,000 graduates that are to be employed and trained as teachers; 370,000 non-graduates (artisans, technicians) to be trained and employed; 1 million people (Farmers, market women, etc) to be granted loans to set up small businesses; the Conditional Cash Transfer to be made to the most vulnerable people (not unemployed graduates); School Feeding targeting 4.5 million school children and the Bursaries/Scholarships for STEM (Science, Technology, Engineering and Mathematics) students “
Lai Muhammed however faulted the comparison being made by some critics and cynics of the new petrol pump price hike, arguing that it is clearly different from the previous similar increase in 2012 by the regime of former President Goodluck Ebele Jonathan. “Our answer to that is that there is no basis for comparison. The conditions in 2012 were vastly different from the conditions now. Then, oil was selling for over 100 dollars a barrel, compared to just a little over 40 dollars a barrel now. Then, the country was awash in forex, thanks to the high earnings from oil. Then the foreign reserves were high. The situation today is dire: Earnings from oil have fallen drastically. Foreign reserves have fallen. The new price regime is simply inevitable.
“With the drastic fall in the price of crude oil, which is the nation’s main foreign exchange earner, there has also been a drastic reduction in the amount of foreign exchange available. The unavailability of forex and the inability to open letters of credit have forced marketers to stop product importation and imposed over 90% supply on the NNPC since October 2015, in contrast to the past where NNPC supplies 48% of the national requirement “.
He maintained that the “ truth is that the NNPC does not have the resources for, nor is it designed to meet this increase in supply. The result is the crippling fuel situation across the country. Pushed to supply 90% of the products required for domestic consumption, the NNPC has continued to utilize crude oil volumes outside the 445,000 barrels/day allocated to it, thereby, creating major funding and remittance gaps into the Federation account
The minister therefore stated that “there is no provision for subsidy in the 2016 Appropriation. The erstwhile PMS Price of N86.50 gives an estimate subsidy claim of N13.7 per litre which translates to N16.4 billion monthly. There is neither funding nor appropriation to cover this “.
He also revealed that the “ renewed insurgency and pipeline vandalism in the Niger Delta have drastically reduced national crude oil production to 1.65 million barrels per day, against 2.2 million barrels per day planned in the 2016 budget, further reducing income to Federation account and also affecting crude volumes for PMS conversion and impacting Federal Government’s forex earnings.
“Let me also note that the resultant fuel scarcity has created an abnormal increase in price, resulting in Nigerians paying between N150 and N300 per litre as prevalent hoarding, smuggling and diversion of products have reduced volumes made available to citizens “.
Lai Muhammed pointed out that in the absence of available forex lines or crude volumes to continue massive importation of PMS, it is clear that “unless immediate action is taken to liberalize the petroleum supply and distribution, the queues will persist, diversion will worsen and the current prices will spiral out of control “.
Under the new price regime, the minister said, “The PPPRA and DPR will be further empowered to ensure a level playing ground and strict compliance with market rules by all stakeholders and consumer protection. The liberalization of petrol supply and distribution will allow marketers and any Nigerian entity willing to supply PMS to source for their forex and import PMS to ensure availability of products in all locations of the country”, he stated.
