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Nigeria Scraps Fuel Subsidy, Cut Petrol Price

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Nigerian President Muhammadu Buhari

The Nigerian Government announced on Friday that it has scrapped the Petroleum Support Fund, also known as fuel subsidy.

Speaking to journalists at the Port Harcourt refinery where he had spent Christmas inspecting the facility, the Minister of State for Petroleum, Ibe Kachikwu, said the government could no longer pay the subsidy due to the fraud tainting the scheme.

Mr. Kachikwu, who is also the Group Managing director of the Nigerian National Petroleum Corporation (NNPC), also added that the government could no longer afford the payment due to the dip in its revenue, caused by the drop in crude oil prices.

He said a new pricing template he signed off on Thursday effectively removed the payment of subsidy on petrol and that oil marketers would be informed of the development in the coming days.

The official price of petrol is N87 but it is sold for higher prices in many states of the federation.

When pressed on what the new price of petrol would be following the removal of the subsidy, Mr Kachikwu said it would sell for below the current official price, maybe as low as N85 per litre.

“It (new pricing regime) is out,” the minister said. ”I signed off on it yesterday (Thursday). I imagined that in the next couple of days the marketers would get advice on that. The nice thing about the PPPRA, where I signed up on it yesterday is that the price will be far below N87,” he said.

“So for the first time, people will understand that the pricing modulation I was talking about is not a gimmick. It is for real. We have gone to find out how we will be able to fluctuate this market to reflect what the reality of the crude market is. The objective is that one, we cannot afford to continue to subsidise.

“We can’t even understand where those subsidies were going to. There are a lot of fraud elements in it so we need to cut that off.

“The second is the earning capacity of the Federal Government is deteriorating by the day with lower prices of crude and come out more,” he said.

The call for government to scrap the payment of subsidy on petrol has become louder recently following the drop in crude oil prices.

Last week, a leader of the ruling All Progressives Congress and former Governor of Lagos, Bola Tinubu, joined the call for the government to scrap the subsidy regime.

Mr. Tinubu, who had opposed the removal of the subsidy under the administration of former President Goodluck Jonathan, said subsidy was originally a good idea, but it had since been “perverted”.

He, therefore, urged the government to divert the money it is currently paying on subsidy to other social programmes and infrastructure that would have more rewarding impacts on the people.

“In a perfect world, I wish we could sanitize the subsidy regime and thus continue (with) it. However, I have reached the conclusion that there are too many demons in the system for this hell to be converted into good earth let alone heaven,” he said while speaking at the 10th memorial anniversary of left-wing politician and scholar, Bala Usman, in Kaduna.

“I would choose to remove the subsidy and use the money to help people – let us feed our school children, with our local produce promote agriculture, create jobs and start erecting a social safety net for the vulnerable among us in true need,” he added.

On Tuesday, President Muhammadu Buhari told a joint session of the National Assembly that he had directed “the Petroleum Products Pricing Regulatory Agency (PPPRA) to adjust its pricing template to reflect competitive and market driven components” that would keep the price of petrol selling at “N87 per litre for now.”

According to Mr Kachikwu, the President’s comment was informed by the analysis that was done that put the price at below the official price of N87.

“But in applying that where we landed when we did the analysis for the very first time was about N85 or N86 so it is below N87.

“And maybe the first price that will come will reflect it. That was why Mr. President said that prices will be N87 for now. And that is what we have in mind,” he said.

The announcement on fuel subsidy removal came two days after the Nigerian Labour Congress threatened it would vehemently oppose any cut on the subsidy regime.

At the end of its Central Working Committee meeting in Abuja, the NLC said the discordant pronouncements from government officials on plans to cut subsidy was creating panic and confusion in the system, even as it reaffirmed its opposition to any fuel price increase.

An attempt by the government to cut fuel subsidy in 2012 led to what came to be known as the #OccupyNigeria protest.

Nigerians were outraged when in the early hours of January 1, 2012, then President Jonathan announced the removal of subsidy from petroleum products.

The then president’s New Year announcement meant that PMS, which sold for N65 a litre – with subsidy – would go for N141, more than a hundred per cent increase.

This action translated into more than one hundred per cent increase in fares, food, rents and virtually every all goods and services in Nigeria.

Petrol is central to Nigeria’s economy and literally close to every Nigerian’s heart.

Expectedly, that announcement immediately drew Nigerians to the streets, sparking spontaneous protests across the country.

But it soon became clear that the subsidy regime was characterised by monumental fraud.

For instance, to benefit from the 2011 fuel subsidy largesse, some oil companies “manufactured” fictional oil ships (vessels) they claimed traversed seas and oceans of the world carrying imaginary petrol, with Nigeria the final destination of the product, a Technical Committee set up by the Federal Government discovered.

For supplying this phantom product to Nigeria, some seven companies pocketed a princely N13 billion naira from the 2011 fuel subsidy payments, the committee’s report, exclusively obtained by PREMIUM TIMES at the time, showed.

Some other companies, not wanting to create fictional vessels, decided to space- travel existing ones; such that real vessels, which were definitely in countries like China and UAE, were purported to have discharged petrol into storage depots in Nigeria at the exact time they were in those other countries. The 11 companies involved in this category of fraud pocketed N21 billion from the 2011 subsidy payments, the report said.

Sources in the oil industry revealed at the time that those companies were able to perpetuate the crime with the help of field officers of the Petroleum Products Pricing and Regulatory agency (PPPRA) and the Department of Petroleum Resources (DPR), men of the Nigerian Navy, Nigeria Custom officers, banks and others involved in the various stages of fuel importation.

The companies and their owners are still being prosecuted by the Economic and Financial Crimes Commission.

Premiumtimesng

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Government

President Buhari Accuses Governors of Stealing LG Funds

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Muhammadu Buhari

Nigerian President, Muhammadu Buhari has once again accused state governors of stealing monthly allocation due to local government under them.

The president spoke at a parley with members of the Senior Executive Course of the National Institute for Policy and Strategic Studies, Kuru, held at the State House Banquet Hall, Abuja.

Speaking at the event, the president stated that it beats anyone’s imagination how some governors collected money on behalf of council areas in their states, only to remit just half of such allocation to the council chairmen, who would further deplete the remittance by filching it. Investors King learnt. 

 ‘‘I found it necessary to digress after reading my speech and this digression is a result of my personal experience. What they did, this is my personal experience, if the money from the Federation Account to the state is about N100m, N50m will be sent to the chairman, but he will sign that he received N100m. The governor will pocket the balance and share it with whoever he wants to share it with,” the president narrated. 

‘‘This is what’s happening. This is Nigeria. It’s a terrible thing; you cannot say the person who was doing this is not educated. He was a qualified lawyer, he was experienced, yet he participated in this type of corruption.” he queried. 

Furthermore, the president clarified that state governors and local government chairmen should be held responsible for the underdevelopment in the rural areas noting that most of the local governments lack basic amenities. 

Similarly, the National Union of Local Government Employees on Thursday backed the position of the president on the embezzlement and mismanagement of local government funds.

Responding to Buhari’s position, the  President of the Nigeria Union of Local Government Employees (NULGE), Hakeem Ambali, said Buhari was merely stating the obvious.

The NULGE President nevertheless admonished the president to go beyond the statement and ensure governors, especially those in APC to sign the local government autonomy bill into law.  

“He should go beyond that statement. He is the leader of the party, he should ask them to sign the autonomy into law; he is the leader of the governors,’’ he said.

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Government

Ramaphosa Braces for Calls to Resign Over $580,000 Theft at Farm

The panel found the president may have violated sections of the constitution following a theft of $580,000 that was stashed in a sofa at a game farm he owns.

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Cyril Ramaphosa

South African President Cyril Ramaphosa’s allies are steeling themselves before a meeting of the governing party’s top leaders at which he’s likely to face calls for his resignation.

The African National Congress’s National Executive Committee will on Thursday discuss the findings by an advisory panel that there may be a case for Ramaphosa’s impeachment. The panel found the president may have violated sections of the constitution following a theft of $580,000 that was stashed in a sofa at a game farm he owns.

The release of the panel’s report on Wednesday night triggered a slump in the rand. The NEC meeting is scheduled to start at 7 p.m.

Party officials met with the ANC’s chief whip and the speaker of parliament to discuss the report on Wednesday, according to people familiar with the matter. A group of NEC members sympathetic to Ramaphosa held a meeting of their own, said the people who asked not to be identified discussing private party matters.

Pule Mabe, the ANC’s spokesman, didn’t immediately respond to a request for comment sent by text message.

Resignation Option

The meeting of Ramaphosa’s supporters was called by Minister in the Presidency Mondli Gungubele. Two NEC members who are close to Ramaphosa expressed concern that the president may opt to resign — a replay of what happened in June when the scandal over the game-farm theft first erupted and he took advice on whether or not he should quit.

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Ibom MRO to Bring in Forex to Nigeria 

Akwa Ibom State to open a cutting-edge smart terminal building at the Victor Attah International Airport

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U.S dollar - Investors King

The governor of Akwa Ibom State, Governor Udom Emmanuel, has announced that the state is close to opening a cutting-edge smart terminal building at the Victor Attah International Airport and that this will generate foreign exchange for Nigeria. 

Investors King has also learnt that an MRO facility for aircraft would be operational from January.

This comes on the heels of praise from his Edo State counterpart, Gov. Godwin Obaseki, who attended the Tuesday reception in Uyo for two additional A320-200 Airbus aircraft that the state’s Ibom Air fleet had leased from a European company.

Speaking at the event, the governor of Akwa Ibom said that while there were already efforts underway to persuade the government to lease the MRO, the MRO is an investment because it was built with naira, despite its current depreciation, and will therefore generate income.

The Akwa Ibom governor said “Our terminal building is world-class in Africa, our MRO is world-class. If you find one today in the entire Gulf of Guinea, tell me I’ll disassemble this one and build another.

“Look at our MRO; what you see here can accommodate two 747 aircraft as well as eight CRJ aircraft, which we are flying for servicing at the same time.”

“This is the only MRO in this part of the world today, and these facilities are not built with local currency, but we are building this MRO with naira that has no value.”

“I invest in areas where we can see a return on our money. Right now without blinking an eye, I can make over $ 30 million with this MRO if we decide to sell but we are not selling, we will make a foreign exchange from this investment.

“Airbus is on us to come and lease our MRO for all their regional flights, but we are not selling.

“We are going to open up this place ( MRO facility) from January next year for commercial activities and we are going to earn in dollars.”

He thanked Ibom Air’s Board of Directors, Management, and Staff for making him proud, emphasising that “they have done very well.”

Gov. Obaseki, who spoke at the event, stated that Akwa Ibom has become the country’s flagship state for its efforts to invest in and make significant strides in the aviation sector.

Obaseki described Akwa Ibom as the country’s flagship state for its efforts to invest in and expand the aviation sector. “Ibom Air is always completely booked.” Let me thank you on behalf of Nigerians,’’ Obaseki said.

In his remarks, the Managing Director of Ibom Airlines., Mr Mfon Udom announced plans to begin regional flights in 2023.

Udom said the new addition to the fleet of Ibom Air would expand its carrying capacity and boost employment opportunities in the state by 40 per cent.

“With this new capacity coming on board, we are delighted to inform our passengers that we have increased our offerings, providing more frequencies for their convenience.

“The Uyo-Lagos and Uyo-Abuja routes now have three frequencies each every weekday, while our Lagos-Abuja passengers will have seven frequencies to choose from both ways, every weekday,’’ he said.

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