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Nigeria: Fuel Subsidy - Federal Govt Spent 1.45 Trillion Naira in One Year - Minister
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Vanguard (Lagos)
21 July 2008
Posted to the web 21 July 2008
Yemie Adeoye
The Federal Government says it spent about N1.5 trillion to subsidise Premium Motor Spirit (PMS) popularly called petrol in the first year of President Yar'Adua's administration.
Consequently, it is now considering total removal of the subsidy effective January 2009, Minister of State for Energy (Petroleum), Mr Odein Ajumogobia (SAN), said last weekend.
Soliciting the support of Organised Labour, under the aegis of the Trade Union Congress (TUC) in Lagos, the Minister said government spent more than N770 billion on subsidy for petrol in one year and that this figure, when added to the subsidy on Automated Gas Oil (AGO), otherwise known as diesel, is about N1.5 trillion per annum.
Mr. Ajumogobia said all hands must be on the deck to enhance the growth of the nation's oil and gas sector.
"We must learn to live without subsidy on petroleum products, since our country's growth is solely dependent on the oil and gas industry," he said, stressing that countries like Ghana and Indonesia that solely depend on imported products have been able to remove subsidy from petroleum products without much ado.
The Minister also noted that investors would not invest in the sector if the peg on products continued to be determined by government.
Arguing government's stance on subsidy, he said research conducted by government indicated that the ordinary Nigerian does not in any way benefit from the impact of the subsidy, adding that only a privileged few enjoy from the largesse.
"This meeting today is a shortfall of the present administration's stance on carrying the organised labour along in the situation of things as it concerns the nation's oil and gas sector, especially as regards the downstream sector of the industry.
The downstream sector is very critical to the growth of the industry and most times problems such as strike have created a clog in the wheel of progress in the industry.
"Besides, prices of products have always been an area of tension between unions and government, that is why this government has created a vehicle to carry stakeholders in the sector including the organised labour along.
"The sector recently, as you know, is bedeviled by crisis and problems of funding and it is paramount that we all work together to ensure the success of the industry and the country," Ajumogobia said.
To ensure that the proposal for the removal is jointly perused, the minister said a stakeholders' meeting would soon be called to brainstorm on the subject.
PENGASSAN kicks against subsidy removal
Objecting to the minister's call for subsidy removal, General-Secretary of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Mr Bayo Olowoshile, said instead of the huge amount used to subsidise products, the money should be channelled towards reactivating existing refineries and build additional ones.
According to him, government has always treated the issue of functional refineries with levity, adding that the time is now ripe for the present administration to prove its worth as a people oriented government.
He, however, opined that the outright removal of the subsidy was not the solution for the present crisis bedeviling the country's oil and gas sector as regarding prices of petroleum products.
Marketers get N45bn subsidy claims
The Federal Government has reimbursed petroleum marketers, including the Nigerian National Petroleum Corporation (NNPC), the sum of N45 billion being subsidy claims for the import of petrol and kerosene for the months of January to May 2008.
This was contained in a statement released by the Petroleum Products Pricing and Regulatory Agency (PPPRA), weekend.
With this payment, the Federal Government only owes the marketers an outstanding claim for the month of June, which is currently being processed by the Federal Ministry of Finance.
Government, therefore, hopes that the settlement of the marketers' claims will encourage products procurement into the system, thereby ensuring availability of products to all Nigerians.
While commending marketers for their unrelenting support by continuing to procure products under the PSF, the PPPRA assured marketers that government was fully committed to paying their claims more frequently, "as efforts are being made to ensure monthly release of funds into the PSF account with the Central Bank."
The Federal Government in January 2006 set up the Petroleum Support Fund (PSF), which is funded by the three tiers of government to stabilise the domestic prices of petroleum products against volatility in international crude oil and products prices.
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Other objectives of the PSF Scheme include creating a level-playing field for active participation of NNPC and other marketers in products supply and distribution, as well as entrenching transparency and accountability in the administration of the Fund on petroleum products subsidy in line with the government objectives.
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