Group Managing Director of NNPC Dr. Ibe Kachikwu has announced the removal of fuel subsidy. He announced that Petroleum Motor Spirit (PMS) will henceforth sell at N145.
Briefing State House Correspondents on Wednesday after a meeting with Vice President Yemi Osinbajo at the Presidential Villa, Minister of State Petroleum, Dr Ibe Kachikwu said the decision was reached at a stakeholders meeting attended by the leadership of the Senate, House of Representatives, Governors Forum and labour unions including the NLC, TUC, NUPENG, and PENGASSAN.
Ibe Kachikwu noted that the main reason for the current problem was the inability of importers of petroleum products to source foreign exchange at the official rate due to the massive decline of foreign exchange earnings of the Federal Government, adding that as a result private marketers have been unable to meet their approximate 50% portion of total national supply of PMS.
According to the official statement, any Nigerian is free to import the product and sell at a price not above N145 per litre. The minister said:
“In order to increase and stabilise the supply of the product, any Nigerian entity is now free to import the product subject to existing quality specifications and other guidelines issued by Regulatory Agencies.
All oil marketers will be allowed to import PMS on the basis of FOREX procured from secondary sources and accordingly PPPRA template will reflect this in the pricing of the product.
Pursuant to this, PPPRA has informed me that it will be announcing a new price band effective today, 11th May, 2016 and that the new price for PMS will not be above N145 per litre.”
Furthermore, the minister said the government expected that the removal of fuel subsidy would “lead to improved supply and competition and eventually drive down pump prices, as we have experienced with diesel. In addition, this will also lead to increased product availability and encourage investments in refineries and other parts of the downstream sector.
“It will also prevent diversion of petroleum products and set a stable environment for the downstream sector in Nigeria.’’
Ibe Kachikwu said that the government shared the pains of Nigerians but, “the inherited difficulties of the past and the challenges of the current times imply that we must take difficult decisions on these sorts of critical national issues.’’
He said that along with the decision, the federal government had in the 2016 budget made an unprecedented social protection provisions to cushion the current challenges. The minister added:
“We believe in the long term, that improved supply and competition will drive down prices. “The DPR and PPPRA have been mandated to ensure strict regulatory compliance including dealing decisively with anyone involved in hoarding petroleum products.’’
The minister said that the stakeholders’ meeting had reviewed the current fuel scarcity and supply difficulties in the country and the exorbitant prices being paid by Nigerians for the product. He said that the meeting observed that prices ranged on the average from N150 to N250 per litre.
Its on record that the last regime’s attempts to remove fuel subsidy was opposed vehemently by the APC (then in opposition). Just a few months old in office, the APC led government has opted to do away with subsidies, It will be interesting to watch the reaction of investors and Nigerians generally to the new development.