Breaking News

Anticipated petrol subsidy removal triggers panic-buying

Kindly Share This Story:

…NAEE, LCCI okay removal
…Cost hits N731bn

By Udeme Akpan, Dayo Johnson, Michael Eboh and Rotimi Ojomoyela

Fuel shortage appeared to have worsened over the weekend as queues of vehicles were seen at filling stations in Abuja, Lagos, Ondo and Ekiti.

File: Dr Maikati Baru,Group Managing Director of the NNPC

Investigation showed that the shortage was fuelled by the Federal Government’s announcement that it might undertake a gradual phase out of fuel subsidy, which the World Bank said cost Nigeria N731 billion in 2018.

The Minister of Finance, Zainab Ahmed, who announced the decision of the Federal Government, was reacting to a recommendation by the International Monetary Fund, IMF, calling on Nigeria to end subsidy on petroleum products.

At the Conoil and Total stations in the Central Business District, opposite the NNPC Headquarters in Abuja, slight queues were seen while black market operators were seen calling motorists for patronage.

In Lagos, there were long fuel queues at stations in Maryland and other parts of the city as many people used the weekend to ensure they had adequate supplies.

Entertainment galore as ‘33’ Export delights consumers in Benin, Enugu, Aba

Mr. Tayo Aboyeji, the National Union of Petroleum and Natural Gas Workers, NUPENG, South West Chairman, informed Sunday Vanguard, in a telephone interview, that the situation was fuelled by panic-buying.

He said loading was ongoing at all NNPC depots across the country,   indicating that the shortage was not real, adding that consumers should not bother about supply as there was adequate supply to meet demand.

NAEE, LCCI seek end to subsidy

Meanwhile, the Nigerian Association for Energy Economics, NAEE, says subsidy on petroleum products should end.

Addressing newsmen in Abuja, yesterday, ahead of the 12th NAEE/IAEE Conference, the President of the association, Professor Wumi Iledare, argued that the benefit of fuel subsidy in Nigeria is far less than the cost.

He said, “I believe that the benefit of subsidy is far less than the cost of subsidy. Anytime government has a policy, there is need for that policy to be reviewed to see whether the policy that comes from that policy is more than the cost or whether they are equivalent.

“If you look around, the roads are bad, the hospitals are bad, and the infrastructure is not even there. Go and look at the budget for health, education, defence and another, you will see that it is not up to the amount spent on subsidy in 2018.

“I understand the social unrest is scary, but it is just going to be for a while, if there is enough public education on the benefits of the removal. You are losing the capacity that you have because you are actually giving the products to the elites who are capable of paying for their petrol at a giveaway price.”

Iledare further stated that consumption of locally produced energy was imperative for sustainable economic development much more than energy production for rent seeking and rent sharing.

NPA has reduced its operational cost – Bala Usman

He also called on the country to rethink its energy resource extraction policy to ensure access to affordable, sustainable and secure energy for all Nigerians.

In an email to Sunday Vanguard, the Director General, Lagos Chamber of Commerce and Industry, LCCI, Mr. Muda Yusuf, who shared similar sentiment, stated: “Perhaps the biggest fiscal burden on the economy today is the petroleum subsidy regime.   It is a big hole in the finances of government.   It puts tremendous pressure on the foreign reserves and the foreign exchange market, just as it exerts immense stress on the nation’s treasury.

“It remains a cause for concern that the subsidy regime had subsisted, especially at time when the economy is facing unprecedented fiscal challenges; at a time when productivity in the economy is constrained by acute infrastructure deficit; at a time when public institutions are finding it hard to fund their basic obligations. There cannot be a better example of resource misapplication.”

He went on,   “There are two components of this: The first is the genuine subsidy, which is the differential between the pump price and the landing and other costs of fuel. The second [and more disturbing component] is the transparency problems inherent in the fuel subsidy administration, including the petroleum equalisation policy. For several years, the economy suffered severe bleeding from this phenomenon.

“One of the critical elements of the Oil and Gas Sector reform, particularly the downstream sector, is the complete deregulation of the sector. This is the spirit of the Petroleum Industry Bill which, regrettably, has not seen the light of day.   The reform of the oil and gas sector would create a number of advantages for the economy.

“It will free resources for investment in critical infrastructures such as power, roads, the rail systems, health sector, education sector etc. The deficit in all of these infrastructure areas is phenomenal. Fixing infrastructure will greatly improve productivity and efficiency in the economy and impact positively on the welfare of the people.

“It will unlock the huge private investment potentials in the downstream oil sector especially in petroleum product refining. This will ultimately reduce importation of petroleum products and ease the pressure on the foreign exchange market as well as the burden on our foreign reserves. It will eliminate the patronage, rent seeking activities and corruption that currently characterise the downstream oil sector. It will create more jobs for the teeming youths of the country in the downstream oil sector as investment in the sector improves.

“The subsidy regime has done incalculable damage to the economy over the years.   The citizens have in the past suffered untold hardships resulting from scarcity of PMS and in many instances buying the product far above the regulated price.   The nation’s treasury and foreign exchange market has been under severe pressure from the funding of petroleum product importation. This should not continue if the Nigerian economy must make progress.

“Admittedly, it is a politically difficult decision to take, it imperative for the government to demonstrate commitment to this critical reform to unlock revenue for development.   The current management model of the oil and gas sector is clearly not sustainable.”

He added: “The LCCI is worried that the NNPC has practically assumed a monopoly status in the petroleum products production and importation in the economy. It has become practically impossible for private sector petroleum products marketers to import and sell products because of the price distortions which the involvement of the NNPC has created in the industry.

Northeast: Access to water in Borno’s Gwoza signals better life ahead

“The extant policy on pricing of Premium Motor Spirit (PMS) has made it impossible for the private sector marketers in the sector to import or produce PMS. It is even more disturbing that even for the products that have been deregulated such as AGO, it is impossible for private sector players to compete with NNPC because of the huge cost differential resulting from preferential exchange rate and use of crudeswap for finished products importation.”

NNPC assurances

The NNPC had, on Friday, when the queues started building up, debunked claims of scarcity of the commodity, stating that it currently has over one billion litres of the products in stock. It had also allayed fears over any planned increase in price, as it declared that the pump price of petrol remained N145 per litre.

NNPC assures of petrol availability during Easter

In a statement in Abuja, Group General Manager, Group Public Affairs Division of the NNPC, Mr. Ndu Ughamadu, had disclosed that in addition to existing stock levels, for April alone, it has made commitment for importation of 48 vessels of 50 million litres of petrol each.” In its recent report, the World Bank had stated that N731 billion was spent to subsidise fuel in 2018 alone.

Kindly Share This Story:
All rights reserved. This material and any other digital content on this platform may not be reproduced, published, broadcast, written or distributed in full or in part, without written permission from VANGUARD NEWS.


Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.
Do NOT follow this link or you will be banned from the site!