FG to save N700bn yearly on subsidy removalThe Nigeria Extractive Industries Transparency Initiative (NEITI) has given a nod to the proposed oil subsidy removal, stating that government would save N700 billion yearly from the intervention.
Acting Executive Secretary of NEITI, Dr. Orji Ogbonnaya Orji, at a Roundtable on Subsidy Removal Debate Organised by Shehu Musa Yar’Adua Centre in Abuja yesterday, stated that the proposal to remove fuel subsidy was consistent with the recommendations contained in NEITI’s independent audit reports conducted in the last six years.
Orji said: “Removal of subsidy will free over N700 billion annually which can be channelled to provision of infrastructure like roads, education, health service, power, security, creation of jobs and basic benefits for the poor in the society.
“In removing the subsidy, it is the position of NEITI that the government considers progressive measures to put the welfare of the ordinary citizens at the centre of the implementation, by creation of palliative programmes to reduce the pain temporarily that may be experienced by the poor and vulnerable in the short term.
“It is also part of NEITI‘ s recommendations that the government should take steps to either make the refineries work, privatise them or create the enabling environment for private refineries to thrive.” The NEITI boss underlined the need to ensure that the implementation of the proposal is gradual, slow but steady.
According to him, Nigeria spent over N4 trillion on subsidy between 2006 and 2012. “From NEITI’s independent audit report, over N4 trillion has been paid as subsidy to marketers from 2006-2012.
The breakdown of the subsidy shows that N219.7 billion was paid as subsidy in 2006. This rose to N236.64 billion in 2007 and N360.1 billion in 2008.
In 2009, the country paid N198.1 billion as subsidy for petroleum products and in 2010, the subsidy payment rose to N416.45 billion. “The payments skyrocketed to N1.9 trillion in 2011. Payments of oil subsidy declined to N690 billion in 2012 following the subsidy protests across the country in January of that year,” he said.
Meanwhile, the Minister of State for Petroleum and Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Ibe Kachikwu, has denied reports that fuel pump price would be increased to N97 next year.
Kachikwu, at a press briefing in Abuja stated: “I did not say that refined petroleum products will sell for N97 per litre next year. I said that between a band of N87 and N97, we are going to be looking at prices and today the prices are largely close to N87. So, there is no need to change the price.”
He, however, explained that fuel price discourse has long left the realm of subsidy removal to a more scientific price modulation approach which entails an elastic price mechanism regime to be reviewed periodically to reflect the prevailing international price of crude.
He explained that when operational, the novel price modulation system would place a N97 per litre cap on the price of fuel to ensure that Nigerians are insulated from the vagaries of the global crude price. Also, the minister noted that to determine the price of petroleum products in future, the Petroleum Products Pricing Regulatory Authority (PPPRA) will undertake quarterly review of the crude market situation.
“I have not put a static figure. PPPRA will have to do the calculation to be able to announce what price the PMS will sell for in January; but we do not anticipate any major shift because of the price of crude today,” he said.
Director General of the Shehu Musa Yar Adua Centre, Jacqueline Farris, explained that the policy dialogue was convened by the centre to seek the views of industry experts, development partners, the media and the civil society as well as the academia on the subsidy removal debates and the way forward.
On his part, Prof. John Adeoti of the Nigeria Institute of Social and Economic research advised government to implement the removal of the fuel subsidy side by side with the safety net programmes that could grant relief to the poor.
