The Federal Government may have concluded plans to stop subsidising the consumption of petroleum products in the country, especially petrol and kerosene following increasingly dwindling revenue.
The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, gave the clearest hint yet of the planned removal of subsidies on both products by the Federal Government on Tuesday at the ongoing Nigerian Oil and Gas Conference in Abuja.
She said that the subsidies being paid to the marketers by the Federal Government on imported Premium Motor Spirit and kerosene were no longer sustainable, prompting analysts to say the days of the petrol and kerosene subsidy regime might soon be over.
Alison-Madueke stated that the reform already being implemented in the power sector should be taken to the downstream oil subsector, stressing that the negative impact of continued regulation of the sector outweighed the positive impact.
She said, “The continued regulation of the downstream sector has its positive and negative impacts on the economy. But the negative effect is more than the positive. The subsidy policy cannot be sustained any longer.
“This is because the subsidy payment is not benefiting the poor it is targeting; rather, it is benefiting the rich. The industry needs to move to next level by increasing revenue and curbing oil theft and pipeline vandalism.
“Without be labouring the point, we are all aware that the government has to deregulate the downstream sector.
Continuing regulation, we all are aware, has negative effects. It is basically unsustainable, it discourages investment, and principally, it benefits the rich, not the masses in the society that we intend to reach in the first place.
“This means that deregulation is the only way in which capital investment can be encouraged. It can give employment opportunities. At the same time, we are all aware that in a democratic polity, there has to be a balance between different policies and directives of government and the needs and desires of the people of Nigeria at all times.”
If the subsidies on both products are removed, the consumers will be paying a minimum of N144.66 for a litre of petrol against the official regulated price of N97. The N144.66 is the landing cost of the product and the distribution margins as contained in the pricing template prepared by the Petroleum Products Pricing Regulatory Agency for the month of March.
For kerosene, consumers will have to pay N154.36 per litre, which comprises the landing cost of N138.87 and distribution margins of N15.49, instead of the official pump price of N50.
This is the first time in recent times that a top official will provide an insight into government’s thinking on the subject of subsidy removal though there have been official denials that nothing like that is in the offing.
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