FG Says Its Done With Fuel Subsidy After Years of Wasted Resources
The Federal Government through the Ministry of Petroleum Resources said there is no going back on zero-subsidy.
According to a statement released on Thursday by the Minister of State for Petroleum Resources, Timipre Sylva, the Federal Government can no longer bear the burden of petrol subsidy.
In the statement titled ‘Deregulation: The facts and the reasons behind the policy’, the minister said “After a thorough examination of the economics of subsidising PMS for domestic consumption, the Federal Government concluded that it was unrealistic to continue with the burden of subsidising PMS to the tune of trillions of naira every year, more so when this subsidy was benefiting in large part the rich, rather than the poor and ordinary Nigerians,” he said.
Sylva explained that it simply means that the government will not be the sole supplier of petroleum products but will now encourage the private sector to get involved in the business.
“This means also that market forces will henceforth determine the prices at the pump. In line with global best practices, the government will continue to play its traditional role of regulation to ensure that this strategic commodity is not priced arbitrarily by private sector suppliers,” Sylva said.
The minister likened the regulatory function to the role of the Central Bank in the banking sector, “ensuring that commercial banks do not charge arbitrary interest rates”.
Sylva said, “Petroleum products are refined from crude oil. Therefore, the price of crude (the feedstock) for the refining process will affect the price of the refined product.
“When crude oil prices were down, government, through its regulatory functions, ensured that the benefits of lower crude oil prices were enjoyed by Nigerians by ensuring that PMS was lowered. At that time, we indicated that an increase in crude oil prices will also reflect at the pump.”
He said one of the reasons Nigeria has not been able to attract enough investment into the refining industry was because of the burden of fuel subsidy.
Sylva said, “We need to free up that investment space so that what happened in the banking sector, aviation sector and other sectors can happen in the midstream and downstream oil sector.
“We can no longer avoid the inevitable and expect the impossible to continue. There was no time government promised to reduce pump price and keep it permanently low.”
