Minister of Petroleum explains reasons for subsidy removal

The Federal Government has explained the reason for the deregulation of the downstream sector of the oil industry. The government said that this was to ensure economic growth and development of the country.

This was disclosed by the Minister of State for Petroleum Resources, Timipre Sylva, in a press statement on Thursday, July 9, 2020, in Abuja.

Sylva said that it was unrealistic for the government to still continue with the subsidy regime, especially with the Premium Motor Spirit (PMS) otherwise known as petrol, as it had no economic value.

He asked Nigerians to ignore the misinformation and misguided comments that have been in the public space on the issue.

According to the Minster, ‘’It has become expedient for the Ministry of Petroleum to explain misconceptions around the issue of Petroleum Products Deregulation. After a thorough examination of the economics of subsidizing PMS for domestic consumption, the government concluded that it was unrealistic to continue with the burden of subsidizing PMS to the tune of trillions of Naira every year.’’

“More so, when the subsidy was benefiting in large part the rich rather than the poor and ordinary Nigerians. Deregulation means that the Government will no longer continue to be the main supplier of Petroleum Products, but will encourage private sector to take over the role of supplying Petroleum Products.

He pointed out that in line with global best practices, the price of petroleum products will be determined by market forces. He, however, added that the government will continue to play its traditional role of regulation and ensure that it was not priced arbitrarily by private sector suppliers.

Sylva said that the regulatory function will be similar to that played by the Central Bank of Nigeria in the banking sector where they try to make sure that deposit money banks do not charge arbitrary interest rates on its customers.

The minister noted that the government has earlier revealed that an increase in crude oil prices would also reflect at the pump price of petroleum products.

Going further Sylva said, ‘’Indeed, one of the reasons we have been unable to attract the level of investments we desire into the refining sector has been the burden of fuel subsidy. We need to free up that investment space so that what happened in the Banking Sector, Aviation Sector and other Sectors can happen in the Midstream and Downstream Oil Sector.’’

” We can no longer avoid the inevitable and expect the impossible to continue. There was no time government promised to reduce Pump Price and keep it permanently low. Let us, therefore, ignore the antics of unscrupulous middlemen who would want status quo ante to remain at the expense of the generality of Nigerians.,” he added.

He disclosed that the deregulation policy will attract more investments into the oil sector, create more jobs and opportunities and free up trillions of naira to develop infrastructure instead of enriching a few Nigerians.

The minister noted that government who is mindful of the impact of higher PMS prices on Nigerians is working to roll out the auto gas scheme which will provide citizens with alternative sources of fuel at lower cost.

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