Minister of State for Petroleum Resources, Dr Emmanuel Ibe Kachikwu, has admitted that the federal government of Nigeria is still paying huge sums in petrol subsidy annually.
The subject of whether Nigeria is still subsidizing Premium Motor Spirit (PMS), popularly called petrol, has lingered on since Muhammadu Buhari took over from Goodluck Jonathan as President in 2015.
For a period, the government appeared to live in denial on the subject of subsidizing petrol at the pumps.
However, Kachikwu says petrol lands at the ports at N180 and is sold at the pumps at the regulated price of N145, which translates to the government paying the price differential of N35.
To remove subsidy or not?
Kachikwu adds that it will be difficult to end the subsidy regime, because the average Nigerian would react badly.
“You have very positive argument that says, ‘Why is this happening; let’s get it (subsidy) out.’ Once you do it, the streets get flooded by protesters. You have five or six or 10 days of no activity in the country. So, any attempt to remove the subsidy must be very well-managed,” Punch quotes Kachikwu as saying on NTA.
Following prolonged scarcity of petrol and long queues at filling stations in 2016, President Buhari increased the pump price of petrol from N86 to N145.
Kachikwu says it was a good move to increase the price of the product at the time.
“Eventually, thankfully, Nigerians saw through what we were trying to do and let it happen. And thank God that happened at the time because when you look at the gap today, the landing cost is about N180 per litre and sale price is N145. Imagine if it (pump price) was N90-something; we will literally be a bankrupt country.
“The point I am making is that anything you are going to do on subsidy requires a very efficient management of information – getting everybody who are stakeholders to tie into it.
“Should we deal with the removal of subsidy? I was gung-ho when I assumed this position that there was no way I was going to tolerate a subsidy regime at the time in 2015 of about N1.2tn-N1.3tn. There was just no way; we didn’t have the capacity to continue to pay.
“So, I convinced the President that this needed to happen; thankfully, he listened, he agreed and we did. Now, we then had over-recovery period for quite a while and then we went into this upswing in prices that has now taken us again into under-recovery”, Kachikwu reportedly said on the NTA program.
Dead refineries
Nigeria currently imports the petrol it consumes, even though it is Africa’s number one crude oil producer.
Kachikwu says making local refineries work is the long term solution to Nigeria’s petrol subsidy woes.
“I think, first and foremost, we need to find a way of fixing refineries quickly, whether it is government-funded or whatever – my preference is always private sector funding.
“I think the labour union has never really said they would not be supportive of an attempt to take away this subsidy element; the union has always said, ‘If you are doing it, show me what you [will] do with those new receipts of income. Two, what do you do with the refineries?’ Therefore, we need to address those to even get their buy-in.
Car owners queuing at a petrol station in Nigeria during a period of petrol scarcity (Guardian)
Car owners queuing at a petrol station in Nigeria during a period of petrol scarcity (Guardian)
“Secondly, we need to segregate between those who need subsidy and those who don’t; you will find that 80 per cent or more of those who get subsidy today do not need it. There is nothing necessarily bad with some element of subsidy if it is well-managed and is very little, and if the private sector can take it away completely; that is fantastic. That is the most ideal situation.”
There have been recent rumours concerning an increase in the pump price of petrol. The state-run Nigerian National Petroleum Corporation (NNPC) which imports a chunk of the petrol consumed in the country, has debunked the rumours.
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