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New Petroleum Act: Nigeria Says No Immediate Removal of Petrol Subsidy

Nigeria’s federal government has said it will not immediately end its current subsidy of petrol, saying it intends to manage the process to ensure that vulnerable Nigerians are not heavily

Nigeria’s federal government has said it will not immediately end its current subsidy of petrol, saying it intends to manage the process to ensure that vulnerable Nigerians are not heavily impacted.

The country’s deputy oil minister Timipre Sylva, who spoke at a briefing in Abuja on Tuesday to mark his two years in office, noted that although desirable, operationalising the free market regime would require that a lot of economic shock absorbers will be out in place.

Sylva noted that because deregulation would come with a lot of changes, it would not be advisable to suddenly remove the subsidy, saying it would become a reality when the law becomes fully operational.

“It (deregulation) is something that is desirable, which I have always said. I’ve never deviated from that. Deregulation is desirable because that is the sustainable way out of where we are. But also, the reality is that deregulation is going to come with some changes.

“And of course, when people have been used to certain behaviours, behavioural patterns which means you’ve been used to subsidy for this long, and you want to change that, you have to have some kind of change management process in place.

“You cannot just change the policy on everybody without looking at some of the problems that this might create. One of which is that we know that this is going to entail increase in price. How do we alleviate the problems that will come with this increase?

“This is not a mindless government. It is a government that really, really cares about the Nigerians. So, we have to really look at all these possibilities of how to at least alleviate the pains and the problems that this increase might occasion. And that’s why we are taking our time. And that’s why it will not happen overnight.

“But I’m just telling you that there is a provision in PIA that will make this happen, that we have to jointly ensure that we’re able to come up with a workable way of making this happen. And that process is already ongoing,” he stated.

He admitted that although the new law has actually deregulated the sector, it wouldn’t mean that there would be an immediate implementation of pricing.

The minister further said that governors were asking for deregulation and by extension a price increase because it would be in their interest, adding that a hike means they would have access to more revenue from the federation account.

He noted that governors are currently getting less from the federation, saying that they had realised that in the end, they are just cutting their noses to spite their face with subsidy.

Also, contrary to the position of the Group Managing Director of the NNPC, Mallam Mele Kyari, that Nigeria was consuming about 103 million petrol daily, Sylva described that figure as a “flash” which happens once in a while, pegging the figure at 52 million litres daily consumption on the average.

“But of course, you know we have flashes. Sometimes, we have these flashes. The daily consumption was at about 66 million litres per day when we came in, and were able to bring it down to about 52 million. That’s really the average.

“But once in a while, you have that flash and it goes up, maybe because of the activity of smugglers. Well, those are not really the ideal situations, so you cannot really use that as the measure of what is the average consumption.

“The average product consumption has actually reduced from about 66 million on average. But of course you can’t discount these flashes that you have, which you cannot really judge us on,” he added.

On the host communities’ fund, the minister explained that it was better to have three per cent of what the communities are sure of.

He described all the levies and taxes paid by oil companies as a balancing act, saying the new legislation has been fair to the host communities and pointing out that for the first time, there is now a pool of funds targeted at the host communities in this country.

On the rising prices of cooking gas, the minister stated that the market has been fully deregulated, emphasising that government was no longer in control of how much the product is sold.

“We are not in a position to determine gas pricing because gas is not a regulated product. But then we are also very concerned that prices are high. We are also doing something about it.

“Just in the interest of the ordinary Nigerian, I have discussed with some of the suppliers. But I can tell you that it is not really our role. But just in the interest of Nigerians we are trying to see how we can intervene with the suppliers and have discussions to allow us see how we can bring down the price of gas to make it more affordable.

“I understand that the average cost of cylinder now is N5,000 to N6,000. But we are following the price and we are doing something about it with the suppliers,” he explained.

The minister who also took time to explain the frontier exploration fund, noted that the frontier territories are not only in one area of the country.

“There are frontier territories in Cross River, in the North-east and in the South-west. So when people just locate frontier territories in one part of the country and settle on that, then there’s a problem. So, we must come together as a country, frontier and host communities,” he advised.

He argued that Nigeria has had about 37 billion barrels reserve for the past 10 years and has not added to it, saying there was need to bring vigour into the industry.

“We cannot go back to where we are coming from. Let’s look forward as a country, we must look at Nigeria. First, who is the one that is gaining. And I think in this case, it is Nigeria that is the ultimate beneficiary,” he noted.

Sylva added that the sector has been able to reduce the cost of production by over 5 per cent, despite the issues of currency fluctuations, as the industry has rationalised contracts, renegotiated others, while many expatriates who were paid in hard currency left because of COVID-19 pandemic, allowing Nigerians to step in.

Emmanuel Addeh, Adedayo Akinwale in Abuja Dike Onwuamaeze in Lagos