Nigeria’s daily fuel subsidy drops to N1.8 billion

At an exchange rate of N196.90k to a dollar, the country’s fuel subsidy has dropped from the N51.61 per litre it recorded last week to N45.66 per litre, according to the pricing template by the Petroleum Products Pricing Regulatory Agency (PPPRA).

With this latest development, as at Monday this week, the daily payment on subsidy has therefore dropped from N2.06 billion to N1.8 billion as at June 19 2015.

The landing cost of Premium Motor Spirit (PMS), otherwise known as petrol, also dropped from N123.12 per litre as at June 11 to N117.17, while the Expected Open Market Price also dropped from N138.61 per litre to N132.66.

Based on daily petrol consumption of 40 million litres, a figure supplied by the Pipelines and Products Marketing Company, the total subsidy to be paid by the Federal Government to marketers on the product as of June 22 would be N1.8 billion down from N2.06 billion at N51.61 per litre on June 11. Subsidy refers to the money paid, usually by the government, to keep prices below what they will otherwise be in a free market system.

Speaking on the implication of subsidy payment to the nation’s economy, Reacting to the issue, President of Nigeria-Vietnam Chamber of Commerce and Industry, Prince Oye Akinsemoyin, said in an interview with The Guardian that Nigeria has to focus on what is of interest to the Nigerian people. According to him, there is need for the country to focus of petroleum refining in order to save the country from payment of subsidy.

He stated: “The first thing to do is look for new markets for Nigerian crude. That is why we have been telling Nigeria that Vietnam is ready to be buying crude oil from Nigeria. We should start looking in the direction Asian countries. These Asians are willing to work with Nigeria.

Nigeria can sign a term contract that will last for up to 20 to 25 years of continuous purchase of crude oil from Nigeria. We should diversify the economy to reduce over dependence on crude oil.

“We should also consider refining our crude oil. Although the Nigerian refineries refining capacity is abysmally at the moment, we can enter into strategic refining partnership with Vietnam that would see Nigeria through the difficulty of her limited refining capacity of the moment.

This is necessary, because by the time we refine the crude oil, we will also be getting other products such as condensates, naphtha, LNG. “We have to look at what we have.

We have four refineries that are presently not producing up to full capacity. We need to find out why the refineries are not working up to full capacity. We need to find out exactly what is wrong with our refineries and fix them.

If the refineries are not working up to capacity, something is wrong. This type of formula will work. But, once the refineries are put back on their feet, the country can now disengage from such arrangement”. First President of Polymer Institute of Nigeria, Chief Kunle Ogunade, stated that the money the Federal Government is currently spending on subsidy should be directed towards other areas of the economy, saying that subsidy is a curse to this country.

He said that the subsidy has been a fraud through which the country’s revenues are directed to private pockets. He said: “There are four refineries in the country and they are not producing up to full capacity.

Despite the huge amount of money spent on turnaround maintenance, the refineries are still able to meet the need of the country. “Nigeria today is classified as the most corrupt country in the world.

The money for Turnaround Maintenance (TAM) is going into the pockets of people. “The so-called TAM is not being carried out the way it should be done.

If it was turnaround, the refineries should be able to produce up to full capacity. He said that the government should be thinking of having at least 30 refineries in the country. “When I was in Shell, we were sending crude oil to Venezuela to be refined and sent back to us without paying anything.

For example, when we send 100 per cent of crude oil, the company refines and send back 80 per cent and the remaining 20 per cent, serves as the payment for refining and this was very successful.

On Fridays, we used to have a meetings were we agree on the amount of crude oil to be sent to Venezuela and there was no need for fuel subsidy. “But, some smart guys prefer to be bringing in products and collecting subsidy.

The government decided to introduce subsidy to make it easier for every Nigerian to be able to afford fuel. If there is no subsidy, it will be explosive. Government tried it and it was explosive and they had to reverse it. If there is no subsidy, we may be buying fuel for up to N200 per litre.

“When I was in Shell, we advised the Federal Government that the country should invest in refineries abroad. If we have refineries abroad, the petrochemical plants will be having feed stocks for almost for nothing. It is not too late.

The country can still buy existing refineries abroad. The world is turning to a global village. We can still buy existing refineries that are producing over capacity to be able to meet our fuel requirements pending the time we build our refineries.

This will put a stop to the issue of subsidy in the country. Foreign investors are coming to the country to invest; Nigeria should also go out and invest in other countries”.

He stressed the need for the federal government to redirect the money it currently spending on subsidy should be directed towards other areas of the economy. ‘’Subsidy is a curse to this country. We need to get to that level where nobody will benefit from fuel subsidy.

In Nigeria, we see companies that are not into petroleum business benefiting from subsidy and this has to stop. I believe that the Federal Government can still stop fuel subsidy without raising the pump price”, it added.