FUEL SUBSIDY REMOVAL: TWELVE REASONS WHY DECISION IS RIGHT

01: Trillions of naira have been spent by successive administrations sustaining a corrupt, largely abused regime that has ended up in private pockets, creating overnight billionaires who continue to walk free.

02: Petrol subsidies over the years have caused supply disruptions and engendered inefficiencies in their management.

03: Under the current low oil price environment, dwindling oil revenue and shortage of foreign exchange, deregulation would partly reduce the pressure on the naira and foreign reserves


04: With deregulation, importers of petrol can source for their dollar requirements from autonomous sources, which would ease pressure on the naira and foreign reserves

05: Diversion of products will be minimised, as there will be no incentives for marketers to divert petrol to markets where they are guaranteed higher prices


06: The removal of subsidies will attract critically needed private sector investment in the downstream oil sector and lead to the construction of new refineries


07: As greenfield refineries come on stream in the medium to long-term and NNPC partly privatises its plants under whatever arrangement it chooses to call it, Africa’s largest oil producer would transit from an importer of products to a net exporter of products and end the export of jobs to other jurisdictions


08: The end of subsidies will end crude oil swaps and other opaque trading arrangements that have cost Nigeria billions


09: Savings made by government will be used to develop critical infrastructure that would create jobs, and funds redeployed to subsidise productive sectors of the economy such as agriculture, textile manufacturing and SMEs (wise countries subsidise production, not consumption)


10: With deregulation and the attendant competition, marketers and NNPC will be forced to adopt best practices in order to remain in business


11: Competition will also guarantee that prices will inevitably stabilise and drop over time; US shale oil and new oil discoveries in other parts of the world mean that oil prices are unlikely to ever rise to $100 a barrel, which has a knock-on effect on the price of refined products


12: Realistically, the official pump price of petrol has largely been enjoyed by dwellers in major cities in the country. In the hinterland, where up to 60 per cent of Nigerians still reside, petrol, when it is available, is normally sold way above the regulated price

Meanwhile, Centre for Social Justice, Equity and Transparency (CESJET), on Wednesday, commended the Federal Government’s removal of subsidy from the sale of Premium Motor Spirit, PMS, also known as petrol, which would see the essential commodity now sell for N145 per litre.

The CESJET in a statement in Abuja, by its Executive Secretary, Comrade Ikpa Isaac, described the move as a gift to Nigerians, noting that the removal of the subsidy will put a lasting end to the incessant fuel crisis which have put the nation and innocent citizens at the mercy of a certain cabal.

The statement read:
“Different revelations have emerged of massive fraud in the fuel subsidy process; trillions of naira are alleged to have been fraudulently stolen from the government purse in the name of fuel subsidy payments. It is heart rending to discover that the country is being bled on the side despite its already anaemic financial status”.

Comrade Ikpa said the deregulation of the downstream sector will open up the sector to private investors who hitherto developed cold feet to investing in the sector due to heavy government interference. He said, the removal of subsidy will not only break the cabal but also encourage those who have had refining licenses approved several years ago to go ahead to build the refineries.

On the benefits of subsidy removal, Ikpa added that this will tackle the incessant scarcity of petrol due to importation and also the spring up of petrochemical industries alongside local refining to create jobs. Highlighting the economic benefits of the subsidy removal, the group said the move will save the economy the unnecessary pressure put on the Naira due to the heavy demand for Forex to fund the importation of petroleum products.

“With this removal of subsidy, we will be exporting refined petroleum products thereby earning foreign currencies to shore up our reserves,” it said. He however likened the subsidy removal to the telecom revolution which according to him had freed the sector of unwarranted setbacks. “It is time we do the next big thing after the great telecoms revolution that came with the liberalization of the sector in the early 2000s. We predict that the boom economy experienced with the deregulation of the downstream oil sector will make the telecoms experience a child’s play”, the CESJET said.

Meanwhile CESJET frowned at the continuous spending of over 1 trillion Naira on subsidies and called on the government to remain resolute in its decision to remove subsidy. “Nigeria in the last five years has consistently spent over 1 trillion naira that is about $5b USD annually on petrol subsidies, same country that spent less than 20 billion naira on roads in the year 2015, but spent over 1 trillion naira on petrol subsidies in same year. This is unacceptable. It is on this backdrop that we proudly demand that no group or persons should distract the President Muhammadu Buhari-led administration from saving this nation from this canker worm called fuel subsidy”.

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