The disclosure by the Minister of state for Petroleum and Resources, Chief Timipre Sylva, that the federal government would deploy the over ₦1 trillion anticipated revenue generated annually from the removal of petrol subsidy to fund other critical components of the economy is a welcome development. In an interview with journalists in Abuja penultimate week, the minister also revealed that from October Nigerians can convert cars using petroleum to gas, which he said will be cheaper.
“It is time for Nigerians to face reality and do the right thing. What is deregulation going to do? It is going to free up a lot more money. At least from the very beginning it will save us up to a trillion and more every year. Already, we have taken up the budgetary provision for subsidy which is about N500 billion in the budget. Also, we have taken off the excess forex price that special rate that was given to NNPC which also came at a cost. So, all the money that we used to defend the naira at that time to subsidise the dollar will now be freed up for development.
“I believe that this discussion around subsidy has been a vexed issue that has captured the imagination of this country for a long time now. Successive administrations have attempted to deregulate. But sometimes, some administrations lacked the political will and at other times, the time was not good for it. And why did I say the time was not good for it? Does that imply the time is good for it now? The problem around deregulation is that people must understand first, that the product we are talking about is a derivative of crude oil. It is refined from crude oil. Therefore, it has a direct relationship with the price of crude oil. If the price of crude oil goes up, then you expect that it would reflect in the price of the derivative.
“So, the best time to achieve this we looked at was the time when crude oil prices are low so that Nigerians will get the benefit of those low prices. In March, when we announced the deregulation, the prices were low and that advantage was transferred to the consumer. So, we brought down the price of petrol. The unfortunate thing is that when we brought down the price of petrol, nobody reacted in the market place. The prices were the same. Nobody reduced their prices because price of petrol had reduced. Even bus fares, taxi fares were the same. It did not go down when we reduced the pump price of petrol. We thought that those people in the market; the transport drivers and transport owners would reduce their price. But nobody reduced their prices. But anytime there is even a kobo increase in the pump price of product, you see that people will increase their prices triple fold and four fold.”
On the plan to roll out car conversion next month, the former Bayelsa state governor said: “To give it (deregulation) a human face, we are introducing an alternative fuel. We are giving auto gas. Gas will now become a fuel for our cars. This programme will be rolled out within the next one month. So, if you go to a filling station and you convert your car to dual capability or dual fuel, then you drive into a typical filling station you will find gas LPG, you find CNG and NLG being sold. So, if you look at the price of PMS versus the price of gas and you think that gas is cheaper which, of course, it is going to be cheaper.
“Gas will even be cheaper that PMS as it is today. So you see that we are also giving an alternative to the ordinary Nigerians. You now have a situation where tricycle, I pass my neighbour generators etc will convert to gas. So, you connect your gas cylinder in your house to your generator and it becomes easier for you, cheaper and cleaner. We are not just deregulating, we are also giving you an alternative to make it easier for the average Nigerians.”
We acknowledge the fact that there is a consensus among Nigerians on the propriety of the full deregulation of the downstream sector of the petroleum industry, which encompasses mere removal of the petrol subsidy. The expectation on the deregulation of the sector is hinged on the fact that the nation’s four refineries in Kaduna, Port Harcourt and Warri be given a complete turn around and brought back on stream with 100 per cent capacity utilisation.
Alternatively, the federal government was expected to build new refineries if the existing ones are obsolete and irreparable. Having failed in this expectation, we advise the federal government to inject the over ₦1 trillion anticipatory annual revenue from the subsidy removal to the provision of optimally functional refineries. This is a better solution to the subsidy scam as it will not only end the fraudulent subsidy regime but also end the import era which is scandalous and embarrassing to the sixth oil producing nation in the world.
