Fuel Queue
The price of Premium Motor Spirit (PMS), is expected to
rise to N700 per litre following the announcement of the removal of
subsidy by President Bola Tinubu.
BUSINESSINSIDERNG, reports that the
Nigerian National Petroleum Company Limited (NNPCL), said it spent N4.39
trillion ($9.7 billion) on a petrol subsidy last year.
However, the newly sworn-in President Bola Tinubu, in
the first policy directive of his administration yesterday, during his
inaugural speech, announced the removal of fuel subsidy.
According to President Tinubu, “subsidy can no longer justify its ever increasing costs in the wake of drying resources.”
Reacting to the announcement, the general secretary of
Petroleum Dealers Association of Nigeria, PEDAN, Ibrahim Yahaya, said
though the President’s subsidy removal announcement was still vague and
not very clear, the truth is that pump price of petrol will go up.
Yahaya, said players and marketers would begin to engage
with authorities to fully understand the aspect of the subsidy being
removed.
Presently, he said the government pays equalisation cost which covers internal movement of petrol distribution and landing cost.
For example, he said from unverified data, landing cost
is about N500 a litre while cost of bridging from Lagos to Abuja is N48
per litre.
“Now when you add these costs together and marketers margins it will go as high as N700 a litre.
However, until the government makes its statement clear the actual cost of petrol will not be determined” he said.
Meanwhile the Centre for the Promotion of Private
Enterprise (CPPE) has calculated that the federal government can
generate a minimum of N10 trillion annually from the removal of fuel
subsidy as well as elimination of the Central Bank of Nigeria
(CBN)-subsidised foreign exchange window.
CPPE, in its Economic Agenda for Incoming Administration
signed by its chief executive, Dr Muda Yusuf, said there was a need for
the incoming government to prioritise macroeconomic stability with
emphasis on moderating inflationary pressures, stabilising the exchange
rate and boosting economic growth.
According to the CPPE, elimination of fuel subsidy will
save an estimated N7 trillion annually, just as the “elimination of
foreign exchange subsidy will unlock a minimum of N3 trillion revenue
annually from the sale of CBN forex to the official foreign exchange
window.”
CPPE also called for a foreign exchange policy reform to
unlock inflows of capital into the economy, reduce arbitrage in the
forex market and improve transparency in the forex allocation.
It further urged the incoming administration to: “Ensure
a market reflective exchange rate to eliminate the distortions in the
forex ecosystem; ensure level playing field in forex transactions;
remove impediments to market mechanism in allocation of forex.
This will boost inflows from Foreign Direct Investment
(FDI), Foreign Portfolio Investment (FPI), Export Proceeds and Diaspora
remittances.”
However, in his calculation, former minister of state
petroleum resources, Timipre Sylva, said that Nigeria would save over N1
trillion annually due to the removal of fuel subsidy.
The former minister noted that with the deregulation of
the downstream sector of the oil sector, it would be easier to woo
investors required to revitalise the nation’s comatose refineries soon.
The minister contended that the sustenance of the fuel
subsidy regime was no longer tenable as it had always provided the
leeway for rich and unscrupulous Nigerians to steal and enrich
themselves at the expense of the masses.
Listing the benefits inherent in the policy, he argued
that, “What is deregulation going to do? It is going to free up a lot
more money. At least from the very beginning, it will save us up to a
trillion and more every year. Already, we have taken off the budgetary
provision for subsidy which is about N500 billion in the budget.
“Also, we have taken off the excess forex price that was
given to NNPC which also came at a cost. So, all the money that we used
to defend the naira at that time to subsidise the dollar will now be
freed up for development. And, I believe that going forward, we will
begin to see a lot more development, a lot more money available to the
government that will be put into critical infrastructure instead of
being burnt in our cars.
“And, let us look at this subsidy critically. Who are
the beneficiaries of subsidy? When a few years ago you had this subsidy
scam all over the place, all the monies that were taken by all the
subsidy thieves and so on, how many poor people were among those people?
Subsidy only provides opportunity for rich and unscrupulous Nigerians
to steal and enrich themselves at our expense, at your expense.
“So, deregulation is actually a policy direction that is
good for the common Nigerian. It is going to produce a lot of
opportunities. Before now, you would have asked: Why has the refining
sector not developed? It is because no refinery can operate commercially
in Nigeria with subsidy.
“If you have a refinery and you refine your product and
you are expected to sell it at a subsidised rate, how is the refinery
going to make profit and survive? So, nobody wanted to invest in
refineries. And that is one of the reasons why our refineries became
unsustainable as well because they were refining and selling at a loss.
So, every time they came back to the government to ask for money.
“Anytime any part got bad they had to come back because
they were not operating commercially. So, they don’t have money to
replace those parts. That was why we were refining and selling at a
loss. With deregulation, it means that refineries can operate
commercially.
“And then you can see a lot more investment in that
sector and it is going to create a lot of opportunities and jobs for our
people. With deregulation, it also means that marketers can import
products by themselves and sell at market rates to Nigerians. It is
going to create a lot more activities and opportunities.
“So, deregulation is going to really open up. You know
what happened in the banking sector with deregulation. We had a few
banks but today I cannot count the banks because that sector was
deregulated. You see what deregulation did for the airline sector; we
had only Nigeria Airways those days.
‘When the sector was deregulated you see that the sector
has become a major employer of Nigerians. Deregulation has always been
good for sectors. Look at the deregulation of the telecom sector, look
at the revolution that it has created for Nigeria and for Nigerians.
“So, why are we shying away from deregulating this
sector that is going to provide a lot of opportunities if we do
deregulate because we believe that once we deregulate there would be a
lot of investment coming into Nigeria to build refineries because at
that point it will become commercially viable for them to build
refineries because all these issues we are talking about will not be
there.
“Even the NNPC can easily find the funds to even fix
their refineries because it will then be commercially viable because you
are going to operate refineries commercially. Why are we running away
from this thing? It is people who are political about it. They want to
politicise everything that are saying all kinds of things about the
policy direction that has been taken especially at this time.”
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