Though the biting petrol scarcity across the nation is not showing any
sign of ending, experts in the oil and gas sector are insistent that now
is the right time for the Federal Government to hands off the payment of
subsidy on the product, OKECHUKWU NNODIM, writes
Experts in the oil and gas sector have called on President Muhammadu
Buhari to stop subsidising petrol as they explain that the price of the
commodity will not go beyond N100 per litre if the Federal Government
terminates the fuel subsidy regime.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, had told
journalists in Abuja recently that Buhari had allowed the fuel subsidy to
continue because of his magnanimity.
But this, according to experts, including Kachikwu, is not sustainable.
Industry experts, who spoke with our correspondent on the subject, stated
that the President might feel that the removal of subsidy would result in
a rise in the pump price of petrol, but maintained that the cost of the
product might either remain the same or would not go above N100 per litre
if the government puts a stop to subsidy payments.
They stressed that the fall in the global prices of crude oil had
presented the best opportunity for the President to stop the subsidy regime.
The President, Nigeria Association of Energy Economics, Prof. Adeola
Adenikinju, said, “The price of crude oil has fallen to as low as $40 per barrel.
Therefore, this is the best time for the government to remove subsidy.
“The fall in price has provided the government the best opportunity to
remove subsidy now.”
When told that the President had expressed concern that the removal of
subsidy might result in a hike in the price of petrol and hardship for
majority of Nigerians, the professor said, “The price of crude oil has
fallen so low that even if subsidy is removed now, its removal will not
have any considerable effect on the price of petrol. It will not cause a
serious increase in petrol price and the cost may not exceed N100 per
litre. So, it just has to go.”
Also calling for a halt in further subsidy payment, another industry
expert, Mr. Dibu Aderibigbe, stated that the Nigerian economy was
currently faced with paucity of funds, and wondered why the government
would still be paying billions of naira as subsidy.
Aderibigbe, who is the National Treasurer, Independent Petroleum
Marketers Association of Nigeria, said subsidy removal would not result
in petrol price hike.
He stated, “I say it will not because the business will then be run by
the forces of demand and supply. When you have a lot of producers in the market, you cannot just
jerk up your price.
There are fundamental factors that determine price. One is the price of
crude oil; then, the cost of transportation, the refining cost, marketing
cost and other issues.
“So, the pump price of petrol will certainly fluctuate with the price of
crude, and that is the most important factor here. And the price of crude
has been hovering around $40 and $48 per barrel.
So, at the end of the day, the final price may not be even higher than
what we currently pay. In fact, at best it can’t be up to N100 per litre.
“You can also allow those who want to import the product to go ahead and
import, but not the government; and you can also start your refineries.
If those who refine locally are charging a high price, then those who are
importing will beat them in the business.
That competition will ensure price stability and affordability.”
The payment of subsidy by the government has been a contentious issue as
stakeholders in the oil and gas sector have on several occasions called
on the Federal Government to discontinue the practice, particularly when
the country’s revenue is being badly hit by the fall in crude oil prices.
Kachikwu had recently stated that the Federal Government might review
refined petroleum products’ prices by January 2016, as he explained that
the subsidy arrangement was not sustainable.
He had said, “Frankly, sustaining subsidy based on the rate that we have
now is a major problem for the country and is only happening through the
magnanimity of the President.
We are looking at price modulation.
“By January, we will have a price modulation dynamism that will enable us
address the critical issues with the marketers. But the issue of price
reduction is not in the horizon at all.”
Similarly, a former Governor of the Central Bank of Nigeria, Prof.
Chukwuma Soludo, had advised the President to remove the controversial
fuel subsidy and privatise the nation’s refineries immediately.
“The fundamental case against subsidy removal is not economic: it is the
fact that the citizens do not trust the government to optimise the use of
the proceeds for their welfare. If PMB does not deal with these issues
now, I wonder when, if ever,” he had said.
Kachikwu had also stated that the current fuel scarcity across the
country was largely as a result of the non-payment of the N413bn subsidy
claims to the oil marketers, adding that they all stopped importing
petrol because of the debt.
0 comments :
Post a Comment