Lagos — The Minister of State for Petroleum Resources, Timipre Sylva, says the Federal Government had reached a conclusion that it would no longer earmark yearly monetary budgets for petrol subsidy, describing it as a “burden”.
In a statement published on the ministry’s Instagram page on Thursday, the minister said the decision to stop petroleum subsidy was reached after thorough examination of its economics.
The statement titled ‘Deregulation: The facts and the reasons behind the policy’, Sylva said market forces will henceforth determine prices of petroleum products.
“After a thorough examination of the economics of subsidising PMS for domestic consumption, the Federal Government concluded that it was unrealistic to continue with the burden of subsidising PMS to the tune of trillions of naira every year, more so when this subsidy was benefiting in large part the rich, rather than the poor and ordinary Nigerians,” he said.
According to him, deregulation means that the government will no longer continue to be the main supplier of petroleum products but will encourage the private sector to take over the role of supplier of the products.
“This means also that market forces will henceforth determine the prices at the pump. In line with global best practices, the government will continue to play its traditional role of regulation to ensure that this strategic commodity is not priced arbitrarily by private sector suppliers,” Sylva said.
He likened the regulatory function to the role played by the Central Bank of Nigeria in the banking sector, “ensuring that commercial banks do not charge arbitrary interest rates”.
The minister said, “Petroleum products are refined from crude oil. Therefore, the price of crude (the feedstock) for the refining process will affect the price of the refined product.
“When crude oil prices were down, government, through its regulatory functions, ensured that the benefits of lower crude oil prices were enjoyed by Nigerians by ensuring that PMS was lowered. At that time, we indicated that an increase in crude oil prices will also reflect at the pump.”
He said one of the reasons the country had been unable to attract the level of investments desired into the refining sector had been the burden of fuel subsidy.
Sylva said, “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.”
He said in addition to attracting investments and creating jobs and opportunities, the policy direction would “free up trillions of naira to develop infrastructure instead of enriching a few”.
“Finally, the government is very mindful of the likely impact higher PMS prices would have on Nigerians. To alleviate this, we are working very hard to roll out the auto-gas scheme, which will provide Nigerians with alternative sources of fuel and at a lower cost,” he added.