07/01/2012: Petroleum Minister lists benefits of subsidy removal
The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, has enumerated the benefits of subsidy removal to Nigerians and the economy. The minister said the discontinuation of fuel subsidy is because it poses a huge financial burden on the government, disproportionately benefits the wealthy encourages inefficiency, corruption and diversion of scarce public resources away from investment in critical infrastructure.
She said subsidy removal will save additional resources for investing in programmes targeted at mitigating poverty and spurring economic growth. She noted that since 2000, the government issued 20 licences for new refineries and none of them has resulted in construction of new refineries. The deregulation of the downstream sector of the petroleum industry will lead to rapid private sector investment in refineries and petrochemicals, which will generate millions of jobs and lead to increased prosperity for Nigerians, she added.
She said: “The total projected subsidy reinvestible fund per annum is N1.134 trillion based on average crude oil price of US90 per barrel. Out of this, N478.49 billion, accrues to the Federal Government, N41.03 billion to state government, N203.23 billion to local governments, N9.86 billion to the Federal Capital Territory (FCT) and N31.37 billion as transfers to derivation and ecology, development of natural resources and stabilisation funds.”
The Minister said a robust programme structure has been developed to ensure adequate oversight, accountability and implementation of the various projects, which accruals from subsidy removal would be used for to mitigate the subsidy removal impact. “The entire project will be overseen by a Board to be constituted by Mr. President, consulting firms with international reputation will be appointed to provide technical assistance to the Board in financial and project management. Relevant ministries, departments and agencies (MDAs) would set up project Implementation units to drive the implementation. An independent body will be responsible for monitoring and evaluating the implementation and will report directly to the Board,” she added.
The Managing Director/Chief Executive Officer, Oil and Gas Free Zone Authority, Dr. Noble Abe, who spoke at a forum in Lagos said data from petroleum marketers association showed “USD10 billion is expended annually by the country importing PMS alone.” He said that Nigeria’s biggest problem has been the huge percentage of its income that was spent importing refined petroleum products. He pointed out that oil and gas apart from providing fuel, constitutes important raw materials for production of different products.
He said: “Unknown to many Nigerians, oil and gas is a very important raw material and its use is not limited to powering generators and driving cars. “Over 6,000 products can be identified as made from petroleum; therefore, exportation of mineral resources in its raw form undermines industry, job creation, the availability of raw materials for secondary industries, transfer of technology and contributes to fuelling social ills. “Our goal should, therefore, be to add value to our greatest resource which is one of the most important raw materials known to man. The quantum effect of this will totally transform our economy in little or no time and help to resolve most of the problems we are experiencing as a nation today.” One industry stakeholder said the reason the refineries have not been working and there are no private refineries in the country including occasional fuel scarcity and the government’s ineptitude as well as lack of infrastructure, are all due to the existence of fuel subsidy. They noted that government hide under spending much money on subsidy to perpetuate decay in infrastructure, leave unemployment to soar and fritter away public funds.
According to the sources, with deregulation, private refineries will spring up in different parts of the country much earlier than anticipated. The situation would not only create employment but with refining of crude in-country, the price of petroleum products would fall and make them affordable. They are of the view that Nigerians including the labour unions and civil society groups, instead of rising against removal of subsidy should hold government to accountability by setting some milestones the government should achieve at specific periods with the removal of subsidy.
The sources said if subsidy is removed and the government doesn’t meet with the agreed milestones such as fixing the power, the roads and other infrastructures, the labour and the populace will have every reason to protest.
(Publication from The Nation on 3rd January, 2012).