Posted by By Udeme Clement-Ogbuanu on
The Federal Government has suggested a systematic removal of the huge sum of N1.5 trillion being paid as subsidy for petroleum products on yearly basis, saying the money will be channelled into local production to increase local capacity utilisation in the petroleum sector of the economy.
The Federal Government has suggested a systematic removal of the huge sum of N1.5 trillion being paid as subsidy for petroleum products on yearly basis, saying the money will be channelled into local production to increase local capacity utilisation in the petroleum sector of the economy.
The Minister of Petroleum, Odein Ajumogobia, made this disclosure, while addressing officials of the Trade Union Congress (TUC) in Lagos yesterday, stressing that what the Federal government pays for fuel subsidy alone every year is N700 billion and when other petroleum products are added, it amounts to N1.5 trillion, which is almost like a capital budget for the entire economy.
According to him, abolishing subsidy over night could cause confusion in the system. He explained that government with stakeholders must decide on a systematic approach to adopt in abolishing subsidy and what must be done with the money. He pointed out that the current capacity of petroleum production needed for local consumption in the country is estimated at 30million barrels per day, but the refineries in Nigeria are only capable of producing about 360,000 barrels of their capacity of 445,000 barrels. This he said is quite insufficient for a large population of 140 people, that the amount being paid as subsidy every fiscal year must be re-directed into local production, so that more refineries could be built to boost production capacity to meet existing demands in the country.
Ajumogobia, lamented that the petroleum sector is going through difficult times at the moment, that government has been spending so much money in the sector with little or nothing to show for it, that private sector participation must be encouraged to make the sector commercially oriented. He called on Labour Leaders to work with government in fashioning out strategies on how the money use as subsidy should be utilised to create balance in the economy in terms of improving local production capacity, such that the masses could benefit as well. ģIt is common knowledge that government has been spending money in the sector without much profit, therefore, we must create a new structure to allow the sector operate independently to optimise outputs both in the short and long run developmentī, he said.The Minister however said that new petro-chemical plants are needed in the country to stimulate outputs maximisation in the petroleum sector. He maintained that the petroleum ministry would call soon call a stakeholders meeting, where major stakeholders, and all relevant bodies in the industry would have a round table discussion on measures to be adopted to move the sector forward, in order to boost economic growth and development.Responding to question on the price of diesel, which is now sold between N150 to N200 per litre in some parts of the country, the Minister declared authoritatively that the Nigerian National Petroleum Corporation (NNPC), is selling diesel for N60 per litre, that some individuals indulge in sharp practices in the sector, by buying at the rate N60 per litre from NNPC and selling at a higher rate to others.
His words: ģWhen talking about price disparity, we discovered that sometimes markets forces of demand and supply override the ability to enforce appropriate pricing policy in the sector, and this could also cause disparity in the pricing mechanism, which in turn affects efficient price regulation. For instance, NNPC sells diesel for N60 per litre, but some people would buy at that cheaper rate and they would on their own increase the price to N150 and N200 per litre when selling to others. Another thing is that the system we are presently allows price fluctuation because people also decide to buy at a higher rate because that is not the official pump price approved by government ģ, he stressed.