BY KUNLE KALEJAYE
FORMER minister of interior, Mr. Emmanuel Ihenacho has thrown his weight behind the removal of fuel subsidy. He said at a press briefing yesterday that a regulated market environment is what has brought about the establishment of subsidy in respect of petroleum product that are imported into the country.

He said: “Subsidy must be removed because there is a lot of money trapped there. If we deregulate the market the government will not be compel led to pay subsidy. The subsidy that are currently paid are meant to be targeted in alleviating the condition of the masses but that is not happening because that subsidy has been appropriated by parties other than those who are supposed to get it.

“I have read in newspapers where they said NNPC and marketers share so much money in subsidies that is not true. What happens is that marketers make out money to pay for imported petroleum products because they buy a liter of petroleum product for about N140 and the government then compel them to sell it at N65, which means the government has to refund the difference of N75 to them.

So the subsidy does not lie with the markers or the NNPC. The nature of the subsidy means that it costs about N140 per litre to import the fuel, transport the fuel to the depot, transport it form the depot to the filling stations. When major marketers buy these petroleum products at N140 per litre the Federal Government says NO sell for N65 per litre. At the end there is a disparity of N75 which somebody has to pay.”

The N75 is the subsidy that the Federal Government puts out on every litre of PMS.”

He explained that what the oil marketers received as subsidy is a refund of money which they spend on behalf of the Federal government to import petroleum products in order to bring it into the market adding that the money used to import this product are borrowed from the banks.

“The money we use to import these products is borrowed from the banks and we have to show the banks on how the money we have borrowed is to be spent. Our template is different from what the PPPRA have because every oil marketers must have a template of his own depending on how he wants to import his cargo and depending on the size of the vessel. So the N75 is the subsidy, that is the money that people say the oil company receives, it is actually the money oil marketers spend on behalf of the Federal government. When the money has been spent, the Federal government will have to verify if the oil marketers have spent the money then the FG will refund the money back to the oil marketer. It is not free money, it is not dash and it is not a benefit” he said.

He argued that those who benefit from subsidies are those who go the filling stations to buy petroleum products.

“Subsidies are ostensible supposed to alleviate the poverty of the masses but one paradox that we have and we face is that the masses never go into the filling stations. For instance the person who goes into the filling stations is private car owner who goes in there and can draw as much petroleum product as he likes. The question that you ask yourself is when he goes in there to buy petroleum products for N65 instead of N140 does he stop to give lift to the poor people? It never happens “he said.

Ihenacho stressed that the other set of people who benefit from fuel subsidies are those who operates commercial vehicle.

“Those who operate commercial vehicles go into the filling stations and buy petroleum product. When they get it, do they consult the poor man on how much will be the best price for him to charge? He never does that, so subsidy is not passed on. So the subsidy that we have N1.5 trillion of that amount is absolutely going to people who can very well afford to pay for the full price of petroleum products adding that if common people are to live a better live fuel subsidy must removed”.

He added that the removal of subsidy does not mean cancelation but recovery.

“When we say remove it does not mean concealing it but we recover it and re-channel it so that it is more targeted at the poor people and at least those who can afford to pay. Those who purport themselves as spokes person of the masses must concentrate on the savings that will be accrued from discontinuation of subsidies rather than talking about subsidy and the savings. N1.5 trillion it is a lot of money”

Addressing the issues on refinery, Ihenacho said the country will never have a refinery as long as the market continues to be regulated and subsidy is in place.

“you will never ever have any functioning refinery because people who operate refineries have to borrow huge amount of money from the banks but before the bank approves that money they have to see that there is a way of recovering that money but if you are operating under a regulated system where they will tell you how much you can produce in the refinery and the price you will sell no bank will lend you money and we will never have any refinery”.

He noted that Nigerians should not concentrate on only one thing that will happen when fuel subsidy is removed.

“There are several things that will happen when fuel subsidies are removed. It will lead to price hike but if it leads to price hike as prices are raising, those who are collecting the subsidies will no longer have it and government will no longer have to pay N75 per liter. So over a period of one year you have N1.5trillion that is now available that you can use to ameliorate the adverse impact of price hike. So it is not just one thing that will happen but several things, as prices rise, more people will come into market with investment and that will force the price hike to back down but on the other hand we are collecting N1.5 trillion that was not there before. In balance we will get more money because of the removal of fuel subsidy” he said.

The Senate had on Friday 3rd of December 2011 released names of the beneficiaries of fuel subsidy amounting to a grand total of N3.655 trillion for five years (2006 to 2011).

Among oil companies’ named by the committee, are: Oando Nigeria Plc; N228.506 billion; MRS; N224.818 billion; Enak Oil & Gas; N19.684 billion; Con Oil; N37.960 billion; Bovas & Co. Nig. Ltd; N5.685 billion and Obat N85 billion and AP; N104.5billion.

Also listed were Folawiyo Oil; N113.3billion; IPMAN Investment Limited; N10.9billion; ACON, N24.1billion; Atio Oil, N64.4billion; AMP, N11.4billion; Honeywell, N12.2billion; Emac Oil, N19.2billion; D.Jones Oil, N14.8billion; Capital Oil, N22.4billion; AZ Oil, N18.613billion.

Others are Eternal Oil, N5.57 billion; Dozil Oil, N3.375 billion; Fort Oil , N8.582 billion, while some construction companies were also on the list but the committee said since the commencement of the hearing, the construction firms shut down their web sites.

Reginald Elijah, executive secretary of the PPPRA had told the committee that between 2006 and September 2011, a whopping N3.655 trillion was expended on fuel subsidies, the figures, which differed from the figures of N1.426 trillion submitted by the NNPC, as subsidies on the products, as at August 2011, but argued that the actual and correct figure was N1.348 trillion

Ihenacho seems not to be the only one in support of the removal of fuel subsidy as the Governor of the Central Nigeria (CBN) Lamido Sanusi has supported the removal.

Vanguard gathered that the CBN boss said that although the decision to remove fuel subsidy by government was painful, it was made in order to secure the future of the country. It would be of long term benefit to Nigeria.

Speaking at the 37th convocation ceremony of the University of Benin, Edo State Sanusi said “we have sold over $8bn to oil marketers in the name of importing petroleum products in 2011 alone. Today, the biggest export from United Kingdom to Nigeria is petroleum products, we are an oil-producing country, every time you import products, you are keeping refineries in Europe open, creating jobs in Europe and making profits for European companies,”