Fuel price increase is a global move – FG

Solomon Chung, Abuja

Lai Mohammed , Information Minister
The Nigerian government has appealed to the organized labour to sheath their sword in respect of the proposed strike action, due to the increase in fuel price.
 
“The situation is dire, not just in Nigeria but elsewhere around the world. For instance, the United Arab Emirates, the third-biggest oil producer in OPEC, has become the first country in the oil-rich Persian Gulf to remove transport fuel subsidies,” Minister of Information and Culture, Lai Mohammed said.
 
In addition, the U.A.E has also announced that with effect from 1 Aug. 2016, fuel prices will be deregulated.
 
Also, in response to fiscal pressure caused by the fall in crude oil prices, OPEC’s top oil producer Saudi Arabia has announced a plan to raise fuel prices.
“You can now see that this is indeed a global problem, “Mohammed further stated in a bid to draw attention to the crude oil price crisis.
 
He said the country had no choice than to liberalize the price of petrol, if the country was  to end the crippling fuel scarcity that has enveloped the country, ensure the availability of the products and end the suffering of our people over the lingering scarcity.
 
“Before going into the details, let me debunk the notion that this new price regime amounts to removal of subsidy. No. There is no subsidy to remove because no provision was made for subsidy in the 2016 budget.
 
 Last year, the government paid out 1 trillion Naira in subsidy, and that’s one sixth of this year’s budget. We can’t afford to pay another 1 trillion Naira in subsidy.”
 
Palliatives
He also said that the entire 2016 Budget is packed with palliatives to cushion the effect of the new price regime.
 
“Some 500,000 billion Naira has been set aside for social intervention that will touch the lives of millions of Nigerians and lift millions more out of poverty.
 
500,000 graduates are to be employed and trained as teachers, 370,000 non-graduates (artisans, technicians) to be trained and employed, 1.6 million people (Farmers, market women, etc) to be granted loans to set up small businesses.
 
Conditional Cash Transfer to be made to the most vulnerable people
(not unemployed graduates) School Feeding targeting 5.5 million school children, And Bursaries/Scholarships for STEM (Science, Technology, Engineering and Mathematics) students.”
2012 aborted subsidy
 
In a comparative analysis, the Minister said the situation was different from 2012 and as such, there was no basis for comparison.
 
“The conditions in 2012 were vastly different from the conditions now. Then, oil was selling for over 100 dollars a barrel, compared to just a little over 40 dollars a barrel now. Then, the country was awash in forex, thanks to the high earnings from oil. Then the foreign reserve was high. The situation today is dire.
The NNPC does not have the resources for, nor is it designed to meet this increase in supply. Pushed to supply 90% of the products required for domestic consumption, the NNPC has continued to utilize crude oil volumes outside the 445,000 barrels/day allocated to it, thereby creating major funding and remittance gaps into the Federation account,” he said. 
 
Also, the renewed insurgency and pipeline vandalism in the Niger Delta have drastically reduced national crude oil production to 1.65 million barrels per day, against 2.2 million barrels per day planned in the 2016 budget.”
Benefits
 
Based on the government’s argument and position, it is clear that unless immediate action is taken to liberalize the petroleum supply and distribution, the queues will persist, diversion will worsen and the current prices will spiral out of control.
 
“The liberalization of petrol supply and distribution will allow marketers and any Nigerian entity willing to supply PMS to source for their forex and import PMS to ensure availability of products in all locations of the country.” 
 
He then reeled out the benefits of the new regime as solving the recurrent fuel scarcity by ensuring product availability across the country, reducing hoarding, smuggling and diversion of products substantially and price stabilization.
 
It would also ensure market stability and improve the fuel supply situation through private sector participation; create labour market stability by creating additional 200,000 jobs through new investments in refineries as well as prevent the potential loss of 400,000 jobs in existing investments.