Mohammed Shosanya
18 July 2008
Lagos — The Federal government yesterday kicked off a campaign for the removal of subsidy on petroleum products in the country. Minister of State for Energy (Petroleum) Mr. Odein Ajumogobia, who opened the campaign while addressing the National Executive Committee of the Trades Union Congress [TUC] in Lagos, urged labour organisations to support the government to ensure the removal of subsidy on petroleum products.
According to him, the government would have spent 1.5 trillion on subsidy on Premium Motor Spirit and Automotive Gas Oil, otherwise called diesel, should it continue the exercise till December this year.
He said the costly subsidy regime has no significant impact on the economy, as "only the few rich and opportunists in the country" benefit from it. He also said continual subsidy is a disincentive to investment.
According to Ajumugobia, Indonesia and Ghana sometimes ago removed subsidy on consumption of goods in the country and reaped sound economic growth afterwards. He also spoke on the nation's refining capacity and said the four refineries in the country currently produce 360,000 barrels of refined oil per day, against their projected capacity of 445,000 barrels per day. According
to him, the development leaves the country with no option than to engage in importation of products in order to make up for this inadequacy. He however said the disparity in the price of petroleum products is caused by a system that encouraged some untoward attitudes from operators rather than the insufficiency in the refining capacity of the nation's refineries.
He said the NNPC, for instance, sells diesel at the depot price of N60.15 per litre, despite the increase in the price of oil on the international markets, but that some operators buy from the corporation and resell at multiple prices to consumers. He said the federal government would strive to make the refineries work at full capacity so as to effectively grow the nation.
According to him, government would also make conscious effort to engineer effective growth in the downstream and upstream sectors of the oil industry. He further said government alone cannot drive the pivot of growth in the oil and gas industry without the support of stakeholders such as the labour unions.
He urged labour unions in the country to always make dialogue their watchword when pressing their demands, adding that the current government has listening ears.
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Reduction of subsidy on petroleum products to a level to ease the financial burden on the government would be acceptable and somewhat satisfactory to the poor man on the street. Complete removal of the subsidy will impose hardship on the poor citizen that has to pay more for public transportation, for cooking with petroleum products, wash clothes with petroleum products, pay higher costs for food products indirectly affected by petroleum products costs etc. Without any doubt, complete removal of subsidy on petroleum products will not benefit either the people or the the gvernment ultimately.