The federal government has stated that it has not fixed any date for the removal of fuel subsidy and full deregulation of the downstream sector of the oil industry.
Minister of information Mr. Labran Maku stated this yesterday in Abuja while briefing State House correspondents alongside minister of state for finance Mr. Yerima Ngama, immediately after the Federal Executive Council (FEC) meeting at the presidential villa.
He said, “No takeoff date has been announced. The truth of the matter is, our country is in a very difficult economic situation to continue to run Nigeria with one-third of the budget set aside to subsidise one product. It is absolutely a path to a greater difficulty for the economy”.
Urging the media to assist in creating the awareness of the benefits of subsidy removal, Maku said:? “We have continued to talk about this because every sector we opened up has produced results. People who are emotionally talking about it are not actually addressing what we are saying.
“Let’s take the media; before now, it was only the Nigerian Television Authority (NTA) until government deregulated broadcasting in the country. Before, you could not set up a private radio station in this country or a television station. When the government deregulated, what do we have today? We have private television stations that are now competing with the NTA and the FRCN. If government had decided to control broadcasting in the country, all of you would have been out of job.”
The minister added that although the issue of fuel subsidy was becoming emotional, a critical study of the movement of economies all over the world would show that removal of fuel subsidy was inevitable, “unless we don’t want to develop this country and move forward.”
Maku also disclosed that FEC approved the award of contract for the execution of the outstanding works for gas supply to Niger Delta Power Corporation (NDPC), Alaoji, in favour of Messrs OLISERV Limited in the sum of N2,582,787,557.23 only, plus $8,216,198.44, which is equivalent to N3,815,217,323.00 only, plus five per cent VAT of N190,760,866.10 only, with a completion period of seven months.
Meanwhile, Major Oil Marketers Association of Nigeria (MOWAN) has said that the selling price of petrol when the fuel subsidy is finally removed will be determined by individual marketers, adding that the N140.25 per liter of petrol being recommended by the Petroleum Products Pricing Regulatory Agency (PPPRA) is only advisory.
The executive secretary of MOMAN, Mr. Femi Olawore, who spoke exclusively to LEADERSHIP yesterday, also dismissed fears that the marketers would form a cartel. The body’s meetings are usually restricted to the cost of importation and the subject of fixing a selling price for petrol are never discussed, he stated.
But the PPPRA has said that it still has the means to forestall the formation of a cartel by sanctioning or not renewing the import licence of marketers who attempt to extort consumers. A financial expert, Dr Godwin Owoh, however, believes said the agency will not have the legal backing to dictate price once the subsidy is removed.?
Olawore said, “Each marketer will determine his own price. All the marketers will not sell at the same price because their individual overhead costs differ. The overhead of marketer A is different from the overhead of Marketer B.
“What the PPPRA have suggested is only advisory. They will help to moderate the marketers. Their price is only an advisory price. Each marketer cannot go too far above it or too far below it. Every marketer will also be watching other marketers, so there will be stiff competition.”
When asked if the marketers were not obliged to sell at the PPPRA-recommended price of N140.25 per litre for petrol, the MOMAN executive secretary said, “I have not said that. All I am saying is that each marketer will fix his own price and, whatever it is, it will be guided by the dynamics of the market.
“Everyone will not sell at the same price because each has a different overhead which must be put into consideration and we do not meet to determine the selling price of petroleum products.”
In his reaction over the development, the executive secretary of PPPRA, Reginald Stanley, said import allocation had been reviewed to provide for appraisals of performance by marketers, noting that marketers who performed poorly in a previous appraisal would automatically not qualify for another licence.
Stanley said, “An appraisal would be done at the end of every quarter and poorly performed companies in a quarter need not apply for next the quarter. Though there’s the likelihood of cartels in a deregulated environment, it is the duty of the regulator to ensure that the cartels are broken up.” He warned that marketers with higher price would be sanctioned to serve as deterrent.
But the executive chairman of the Society of Analytical Economists, Nigeria, Dr Godwin Owoh has said the PPPRA will lose its legal right to dictate price because subsidy removal means deregulation.?
Owoh said, “The marketers will go back and form a cartel. Petrol is perfectly inelastic, so even if they fix the pump price at N500 per litre, we have to pay. Every consumer will be at the mercy of the supplier. The PPPRA must recognise that they will no longer have control on the price.”
He said, “PPPRA is no longer regulating the price at N65 per litre. It has stopped auditing the pump price in many parts of the country.
“The state governors are already angling for the money saved, so the argument of the federal government that savings will be invested will not work. If the money that is given to governors is increased, then, removing the subsidy will be of no use.”
In a related development, some Independent petroleum marketers in Kaduna State have taken advantage of the ongoing fuel scarcity in the country to hike the pump price of petrol to N90.
Fuel scarcity has also ushered in traffic gridlock along the major streets of the state metropolis due to long queues of cars. The situation has also left black marketers having a field day: they sell a litre of fuel at N138.
LEADERSHIP checks revealed that major filling stations located along Zaria, Kachia and Abuja roads now sell fuel at the rate of N90 to N95 naira per litre as against the normal price of N65.
One of our correspondents, who was at the Kaduna-Kachia-Kafanchan Express Road gathered that, even with the high price of the product, some filling stations were still hoarding the product while waiting for the serving ones to run out of fuel before they commence selling.
Along Zaria and Abuja roads the situation is not different, as people continue to abandon the filling stations located in the metropolis to purchase the product at a higher price. This, according to them, is “better than following the long queues under the harsh weather”.
Meanwhile, the Labour movement has said that President Goodluck Jonathan’s argument for the removal of fuel subsidy is hinged on false premise and the figures manipulated.
Labour said this yesterday in a statement after it had an interactive session with Jonathan and his economic team in Abuja.
In a statement signed by Acting General Secretary, Nigeria Labour Congress (NLC), Owei Lakemfa and General Secretary, Trade Union Congress (TUC), John Kolawale, Labour said that Federal Governmnet presented a document that listed projects that will be carried with proceeds from the subsidy to include “the construction or completion of eight major roads and two bridges, provision of healthcare for three million pregnant women, six railway projects, youth employment, mass transit, 19 irrigation projects, rural and urban water supply.”
But Labour replied that from “the projected N1.134 trillion to be saved from the subsidy removal, the Local Government allocation is N202.23 billion, States N411.03 billion and the Federal Government N478.49 billion and concluded that even if the Federal Government alone were to spend the entire N1.134 trillion, it cannot execute even a fifth of the projects it had listed.”