Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has said that the Federal Government saves about N16.4 billion every month from subsidy removal.
The funds Dr Kachikwu revealed, would have been used to pay petrol marketers to offset subsidy claims, if it had not taken the decision to end subsidy on the product.
The Minister who disclosed this via a tweet on his twitter handle @ibekachikwu, noted that the government was incurring a bill of about N13.7k per litre of petrol bought by Nigerians before the removal of subsidy.
This huge bill necessitated the government’s decision to end subsidy on petrol and subsequently hiked the pump price, converting the deficit into huge savings.
Dr Kachikwu said at such rate, government would have paid out N16.4 billion to marketers on a monthly basis, adding that the government does not have such fund appropriated for in its 2016 budget.
Also noting that the recent vandalization of petroleum installations by militant groups has resulted in significant fall in the country’s earning from crude oil export since production has dropped.
The Minister in an effort to justify and explain the new framework for petroleum supply, distribution and pricing, also highlighted the benefits of the new policy saying:
“There is no provision for subsidy in 2016 appropriation. As at today, the current PMS price of N86.50 gives an estimated subsidy claim of N13.7 per litre which translates to N16.4 billion monthly. There is no funding or appropriation to cover this,”
“NNPC has continued to utilize crude oil volumes outside the 445,000 barrels per day, thereby creating major funding and remittances gaps into the federation account.”
N16.4 Billion Saved From Subsidy Removal
Dr Kachikwu further explained that going forward, the Nigerian National Petroleum Corporation (NNPC) would be assured of 100% payment to the federation account on the allocated 445,000bpd of crude oil, the proceeds of which would be tailored towards providing palliative measures for the country.
He also noted that the new policy will encourage market stability in the downstream petroleum sector, stabilize fuel supply in the country, discourage hoarding of products and reignite investors’ confidence in setting up refineries in the country to reduce and ultimately eliminate importation of petroleum products.
Relating the new policy in the sector to that of the telecommunications sector in 2001, he implied that the opening of the market will in no time encourage more players to bring in petrol which would eventually lead to a new era of competitive pricing.