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Reps Panel Backs IMF, Says Fuel Subsidy Outdated

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IMF
  • Reps Panel Backs IMF, Says Fuel Subsidy Outdated

The Chairman, House of Representatives Committee on Petroleum (Downstream), Mr Joseph Akinlaja, has expressed his support for the removal of subsidy on Premium Motor Spirit, also known as petrol, as recommended by the International Monetary Fund.

Akinlaja, in a chat with journalists in Abuja on Monday, described fuel subsidy as outdated, stating that farm produce should be subsidised instead.

He decried that the Federal Government had continued to make the payments without appropriation by the National Assembly.

Akinlaja said, “IMF will talk to us in an advisory capacity; they don’t run our government for us. It is the government that is supposed to take the decision. But as somebody who has been in the industry for more than 40 years, I believe that the issue of subsidy for petroleum products is outdated. Nigeria does not have the discipline to operate subsidy in whatever form.

“Subsidy is good for agriculture. I have been in the forefront, for more than 20 years, fighting against removal of subsidy, believing that the Nigerian government or the people responsible will act like America that we copy all the time, it subsidises agriculture. For farmers not to go out of business, if they produce in America, there are agencies to buy the produce from the farmers and preserve them, so that the farmers can produce next year. But here, it is the middlemen who are being subsidised in our Nigerian situation.”

The lawmaker said the amount being spent on subsidy was only known to the Nigerian National Petroleum Corporation and the Minister of Petroleum Resources.

While President Muhammadu Buhari is the Minister of Petroleum Resources, Dr Ibe Kachikwu is the Minister of State for Petroleum Resources and Chairman of the Board of the NNPC.

Akinlaja said, “I cannot tell you how much is being paid on subsidy. We will know that if the government has come to the parliament to ask for a specific amount, based on our specific consumption for the year, for appropriation. If they have not come here, we cannot answer the question. It means that it is only the NNPC and the Minister of Petroleum Resources that can answer the question.

“As for the issue of subsidy, I believe that there is a subsidy that is being paid in whatever name it is called. The executive is responsible for the supply and the distribution of petroleum products in Nigeria. The same executive said petrol especially – because that is the issue now- should as a matter of policy not sell more than N145 per litre. And the same government, specifically the NNPC, at a time last year during the scarcity, said the landing cost was N171.50.

“If oil marketers are instructed not to sell more than N145, and the same government talks about N171.50 as the landing cost, who is paying the difference of N26.50? Somebody must be paying. Definitely, it has to be the government.

“As the Chairman of the Committee on Downstream, when we took on the Ministry of Petroleum Resources, what we heard (from them) was ‘under-recovery.’ What is ‘under-recovery’? Somebody is paying for something. So, I concluded in my mind as a knowledgeable person that the N145 per litre is being subsidised.”

The Managing Director of IMF, Christine Lagarde, at a press conference at the recent joint annual spring meetings with the World Bank in Washington DC, had called on the Federal Government to remove fuel subsidy, saying it was the right thing to do.

Lagarde had stated that with the low revenue mobilisation that existed in Nigeria in terms of tax to Gross Domestic Products, it was important for the country to remove fuel subsidy. By so doing, she opined, the country would be able to move funds into improving health, education, and infrastructure.

Responding, the Federal Government had stated that there were no plans to remove fuel subsidy in the immediate.

The Minister of Finance, Mrs Zainab Ahmed, had said, “In Nigeria, we don’t have any plan to remove fuel subsidy this time because we have not yet designed buffers that will enable us to remove subsidy and provide cushions for our people. So, there is no plan to remove fuel subsidy.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

Electricity Consumers Get 611,231 Meters Under MAP Scheme

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Electricity Consumers Get 611,231 Meters Under MAP Scheme

A total of 611,231 meters have been deployed as at January 31, 2021 under the Meter Asset Provider initiative since its full operation despite the COVID-19 pandemic and other extraneous factors, the Nigerian Electricity Regulatory Commission has said.

NERC disclosed this in a consultation paper on the review of the MAP Regulations.

The proposed review of the MAP scheme is coming nearly four months after the Federal Government launched a new initiative called National Mass Metering Programme aimed at distributing six million meters to consumers free of charge.

“The existence of a huge metering gap and the need to ensure successful implementation of the MYTO 2020 Service-Based Tariff resulted in the approval of the NMMP, a policy of the Federal Government anchored on the provision of long-term low interest financing to the Discos,” NERC said.

The commission had in March 2018 approved the MAP Regulations with the aim of fast-tracking the closure of the metering gap in the sector through the engagement of third-party investors (called meter asset providers) for the financing, procurement, supply, installation and maintenance of meters.

It set a target of providing meters to all customers within three years, and directed the Discos and the approved MAPs to commence the rollout of meters not later than May 1, 2019.

But in February 2020, NERC said several constraints, including changes in fiscal policy and the limited availability of long-term funding, had led to limited success in meter rollout.

NERC, in the consultation paper, highlighted three proposed options for metering implementation going forward.

The first option is to allow the implementation of both the NMMP and MAP metering frameworks to run concurrently; the second is to continue with the current MAP framework with meters procured under the NMMP supplied only through MAPs (by being off-takers from the local manufacturers/assemblers).

The third option is to wind down the MAP framework and allow the Discos to procure meters directly from local manufacturers/assemblers (or as procured by the World Bank), and enter into new contracts for the installation and maintenance of such meters.

“Customers who choose not to wait to receive meters based on the deployment schedule of the NMMP shall continue to have the option of making upfront payments for meters which will be installed within a maximum period of 10 working days,” NERC said.

The regulator said such customers would be refunded by the Discos through energy credits, adding that there would be no option for meter acquisition through the payment of a monthly meter service charge.

“Where meters have already been deployed under the meter service charge option, Discos shall make one-off repayment to affected customers and associated MAPs. Such meters shall be recognised in the rate base of the Discos,” it added.

NERC urged stakeholders to provide comments, objections, and representations on the proposed amendments within 21 days of the publication of the consultation paper.

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Economy

Nigeria’s Economy Moving in Right Direction but Slow – Amina Mohammed

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Nigeria’s Economy Moving in Right Direction but Slow – Amina Mohammed

Nigeria is moving in the right direction economically but its movement is not fast, the United Nations stated on Thursday.

Deputy Secretary-General of the United Nations, Amina Mohammed, said this during a meeting at the headquarters of the Federal Ministry of Industry, Trade and Investment in Abuja.

She said the challenges in Nigeria were huge, its population large but described the country’s economy as great with lots of opportunities.

The UN scribe stated that after traveling by train and through various roads in the Northern parts of Nigeria, she discovered that the roads were motorable, although there were ongoing repairs on some of them.

Mohammed said, “This is a country that is diverse in nature, ethnicity, religious backgrounds and opportunities. But these are its strengths, not weaknesses.

“And I think the narrative for Nigeria has to change to one that is very much the reality.”

Speaking on her trips across parts of Nigeria, she said, “What I saw along the way is really a country that is growing, that is moving in the right direction economically. Is it fast enough? No. Is it in the right direction? Yes it is.

“And the challenges still remain with security, our social cohesion and social contract between government and the people. But I know that people are working on these issues.”

She said the UN recognised the reforms in Nigeria and other nations, adding that the common global agenda was the Sustainable Development Goals.

Mohammad commended Nigeria’s quick response to the COVID-19 pandemic, as she expressed hope that the arrival of vaccines would be the beginning of the end of COVID-19.

On his part, the Minister of Industry, Trade and Investment, Adeniyi Adebayo, told his guest that the Federal Government was working hard to make Nigeria the entrepreneurial hub of Africa.

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Economy

N10.7tn Spent on Fuel Subsidy in 10 Years – MOMAN

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N10.7tn Spent on Fuel Subsidy in 10 Years – MOMAN

Nigeria spent a total of N10.7tn on fuel subsidy in the last 10 years, the Chairman, Major Oil Marketers Association of Nigeria, Mr Adetunji Oyebanji, has said.

Oyebanji, who was the guest speaker at the 18th Aret Adams Lecture on Thursday, said N750bn was spent on subsidy in 2019.

He highlighted the need for a transition to a market-driven environment through policy-backed legislative and commercial frameworks, enabling the sustainability of the downstream petroleum sector.

“Total deregulation is more than just the removal of price subsidies; it is aimed at improving business operations, increasing the investments in the oil and gas sector value chain, resulting in the growth in the nation’s downstream petroleum sector as a whole,” he said.

The managing director of 11 Plc (formerly Mobil Oil Nigeria Plc) said steps had been taken, “but larger and faster leaps are now required.”

According to him, deregulation requires the creation of a competitive market environment, and will guarantee the supply of products at commercial and market prices.

“It requires unrestricted and profitable investments in infrastructure, earning reasonable returns to investors. It requires a strong regulator to enable transparency and fair competition among players, and not to regulate prices,” Oyebanji said.

He noted that MOMAN had recently called for a national debate by stakeholders to share pragmatic and realistic initiatives to ease the impact of the subsidy removal on society – especially on the most vulnerable.

He said, “A shift from crude oil production to crude oil full value realisation through deliberate investment in domestic refining and refined products distribution, creates the opportunity to transform the dynamics of the downstream sector from one of ‘net importer’ to one of ‘net exporter’, spurring the growth of the Nigerian economy.

“Effective reforms and regulations are key drivers for the growth within the refining sector. Non-functional refineries cost Nigeria over $13bn in 2019. If the NNPC refineries were operating at optimal capacity, Nigeria would have imported only 40 per cent of what it consumed in 2019.”

Full deregulation of the downstream sector remains the most glaring boost to potential investors in this space, according to Oyebanji.

He said, “As crude oil prices will fluctuate depending on the prevailing exchange rates, it will be astute to trade in naira to avoid inevitable price swings.

“There needs to be a balance between ensuring the sustainable growth of the crude oil value chain (upstream through downstream) and providing value for the Nigerian consumer and the Nigerian economy.”

He said the philosophy should be for the government to put the legislative and commercial framework in place and let the market develop by itself.

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