Minister of State for Petroleum Dr. Emmanuel Ibe-Kachukwu yesterday made some clarifications about the Petroleum Subsidy Fund (PSF), otherwise known as petrol subsidy.
He said that there was no subsidy in the price of the Premium Motor Spirit (PMS).
Kachikwu, who is also the Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), spoke to reporters after inspecting the Kaduna Refining and Petrochemical Company (KRPC) in Kaduna.
His clarification on the subsidy regime became necessary following stakeholders’ request, such as the Nigeria Labour Congress (NLC) and the Conference of Nigerian Political Parties (CNPP) that he provides an explanation with regards to reports that the government has deregulated the downstream petroleum sector and removed petrol subsidy.
Asked to say categorically whether subsidy has been removed or not since there is no provision for it in next year’s budget, the minister said: “Today, there is no subsidy; we are selling products at N87. In January, we will look at what the trend is, we will announce prices. If that is less than N87, we will announce it and if it is more than that, we will have to announce it. “
According to him, what really matters is not availability of subsidy in the budget, but the consideration of the large amount of money the government spends on subsidy.
Despite the huge fund, Kachikwu said no one had been able to account for it due to the corruption in the management of the fund.
He said : “I don’t want to get caught into this subsidy or no subsidy; money provided in the budget or not.
“I think what is critical is two-fold: one is that the amount that we spent in the past on providing what you might call monetary subsidy is huge, we have never been able to account for it and the amount of corruption there nobody has been able to account.”
The minister noted that Nigerians were expending too much energy discussing if the government should continue to fund the funding gap called subsidy, which runs into N1 trillion.
He said he believed that Nigerians were of the same frame of mind with him that the country needs to exit the subsidy regime.
His words: “First, let me say that we are expending too much energy on semantics. There are two critical issues here; one is, should the Federal Government continue to fund the gap that we see, this huge one trillion naira, and I think everybody is on the same page that as much as it is we need to get out of it.”
“Where we have a disagreement is if we get out of it, should we sell products at certain price or should you let free markets to roll in so that you can skyrocket prices?”
Kachikwu recalled that President Muhammadu Buhari had said that the price of petrol should remain N87 per litre for now, approved that the government should review the market and make the necessary adjustment in line with the dictates of the market.
The minister said: “The President is very emphatic on this; he says, for now, he expects that products should be about N87. He has also given approval for us to be able to look at market trends and make adjustments as need be. So, when you keep asking me if subsidy has been removed, I ask what is subsidy?.
“At today’s price, there is no subsidy and that is why I have gone away from the use of the word ‘subsidy’ and have continuously said that I am more on the page of price modulation. How do we look to fluctuate the market to reflect market dynamics.”
Kachikwu, disclosing that the government will continue to modulate prices of domestic petrol supplies to avert unwholesome profiteering by marketers, said towards the end of January 2016, he expected that Nigeria would be able to locally source up to 10 million litres of her domestic petrol consumption from four of her refineries in Warri; Port Harcourt and Kaduna.
He, however, said that through the price modulation mechanism, the government would continue to monitor price to keep it within a specified band.
“Happy to have Kaduna back, looking forward to have Port Harcourt back. Warri is still a bit far gone but all in all, the more refineries we can bring on board, the better for the situation we have ourselves in.”
Speaking on the volume of products he expects that the refineries would add to the country’s local consumption, Kachikwu said although the country would still import products next year, it would however get up to 10 million litres of petrol from the refineries, starting from the end of January when repairs would have been completed on them.
“Kaduna is doing about 1.5 million litres; hopefully, it will be getting into 2 million very quickly, once the FCC is working. Port Harcourt, when it comes back with a combination of VDU and the FCC, we will probably be looking at about 5 million litres.
“Ideally, we want to be able to get to about 10 million type capacity out of the about 40 that we say is the national consumption per day; that is the trend,” he said.
He added: “If all things were equal, I think the max cap for Kaduna will be in the 2 to 3 million range, Port Harcourt will probably be 5 and 6 million and Warri, if it comes, will be another 3 or 4 million. So, Warri is projected to come back between early and mid-January and I will say that by the end of January if all things were working and we do not have any other complications arising from these aging plants, we will expect to see 10 million litres.”
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