Daily Independent (Lagos)
Adeola Yusuf
2 July 2009
Lagos — Aso Rock is at a serious cross road over the surge in oil prices, which on Wednesday saw the commodity trading around $72 per barrel, checks by Daily Independent have revealed.
This confusion was complicated by a renewed demand by oil importers and marketers for a jerk up in the subsidy for the Premium Motor spirit (PMS), known as petrol to a proportionate level, at a time the Niger Delta crisis has dipped the country's revenue and production to about 1 million barrels per day.
The government pays N1.582 billion as subsidy on every cargo (30, 000 liters) of PMS to the Major Oil Marketers Association of Nigeria (MOMAN), and the Secretary-General of the association, Thomas Olawore told Daily Independent in an interview that the government is owing the association about N20 billion.
Declaring that claims of subsidy by marketers does not mean that they are making gains; the MOMAN scribe threw his weight behind the deregulation of the downstream sector, which would stop the payment of subsidy.
"Government is really confused," a source at the ministry of Petroleum, however, told Daily Independent, "the country is losing revenue due to the Niger Delta crisis and it would pay higher claims as subsidy on the imported product."
Subsidy, he continued, "has always been a source of rancour between government and marketers, on one side and the government and the labour on the other side,"
At the wake of fuel scarcity caused by MOMAN's protest of non-payment of subsidy to its member, Minister of Petroleum, Dr. Rilwanu Lukman vowed to declare a war on the "cabal," which he said, has been living fat on the system.
"The government is handling a double-edge sword of dwindling output and surging oil price," the source concluded.
Reason for this is that the price surge means additional "wasteful spending" by government to subsidise the product even when its revenue base is dwindling alongside the sinking level of the country's output.
Labour has, however declared intention to ground the country's economy into a total a halt if the government make any attempt to remove the subsidy "as a result of the hardship, which would follow subsidy removal."
Olawrore, however said: "We support deregulation because if you take N38 as subsidy on one litre and multiple it by a cargo of 30,000 tons and you convert it to litre of 1,341 it means that for every cargo of premium Motor Spirit that enter into Nigeria, government pays N1.528 bn as subsidy. Should the government continue with this especially when you are not too sure of the volatility of the market?
"Our own position is that government should deregulate, allow marketers to sell at the prevailing price and the money that the government should have used to subsidise should be used productively elsewhere."
Meanwhile, the unrest in the Niger Delta region on Wednesday led global market into a $72 per barrel trading for oil.
This has earlier on Tuesday forced the world to pay higher for a barrel of oil as the commodity price skyrocketed above $73 per barrels before the end of the day's transaction.
The last time oil sold at this price in the global market was October, 2008.
Nigeria, Africa's largest oil producer, featured prominently as the cause for the eight-month high price surge, which analysts said the country's economy did not benefit from.
The country's militants on Monday partly damaged and shut down a Royal Dutch Shell offshore oil platform, an action which swiftly shot oil price above $73 per barrel
The Schork Report edited by United States (U.S.) trader and analyst Stephen Schork downplayed the events in Nigeria and their effect on the market, pointing out that Nigeria's share of the U.S. import market had dropped from 11 percent to 6 percent in the past year.
"For all intents and purposes," he said, "the ... turmoil in Nigeria hurts that country more so than the United States."
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