30 December 2011

Nigeria: IMF Pushing the Country to End Subsidy - - Report

Abuja/Accra — The International Monetary Fund is nudging Nigeria and some other African countries to remove fuel subsidies, a report by UK-based news agency Reuters said yesterday, calling into question claims by Nigerian authorities that they are acting independently in their bid to deregulate the downstream petroleum sector.

One of the countries under IMF pressure, Ghana, yesterday announced ending fuel subsidies, as the government of Nigeria pushes ahead to implement the policy next year.

Officials have said their plans to end subsidy were not being influenced by any foreign power.

But Reuters reported yesterday: "Ghana, which joined the club of oil producers in West Africa last year, has come under increased pressure from the International Monetary Fund to remove the fuel subsidies.

"The IMF has urged countries across West and Central Africa to cut fuel subsidies, which they say are not effective in directly aiding the poor, but do promote corruption and smuggling. The past months have seen governments in Nigeria, Guinea, Cameroon and Chad moving to cut state subsidies on fuel."

Spokesman for Finance Minister Ngozi Okonjo-Iweala, Mr. Paul Nwabuiku, insisted yesterday that Nigeria was not under any IMF pressure to remove fuel subsidy.

"Refer to what the Managing Director of IMF said when she visited Nigeria. She said that Nigeria is an independent country and cannot be influenced by the IMF to do anything. Nigeria is not owing the IMF, we have not taken any facility from IMF," he told Daily Trust.

During her recent visit to Nigeria, IMF Managing Director Christine Lagarde said President Jonathan's 'Transformation Agenda' "is an agenda for Nigeria, driven by Nigerians. The IMF is here to support you and be a better partner for you."

It is estimated that by the time fuel subsidy is removed, price of petrol will jump from N65 per litre to about N140 per litre.

Government officials said over N1.3 trillion is used annually to subsidise fuel products, which they said was not sustainable. No provision has been made for subsidy in the 2012 budget.

Ghana for the second time in twelve months reviewed upwards the prices of petroleum products yesterday.

Ghana's National Petroleum Authority yesterday announced that the recent upward adjustment was necessitated by government's decision to withdraw subsidies on petroleum products in 2012.

The last increase in pump prices of petroleum products was in January this year. The adjustment was by 20 per cent.

Global crude oil price then was $92 per barrel and this increase is to reflect the current world market price of about $107, authorities said.

The Chief Executive Officer of the National Petroleum Authority, Mr. Alex Mould, who made the announcement, said government's decision was informed by the rising cost of crude oil in the global market.

"As you are aware crude oil prices when the last build up was done on the 4th of January, 2011 and for one year, government has been able to keep stable the price at the pump and I believe it is in that respect that the review be done and the pump price passed on to the consumer for full cost recovery," he said.

Mould said the cumulative effect of the rise in crude oil prices this year and the about 5.7 percent depreciation of the cedi meant a 25 percent increase in cedi terms in the cost of procuring crude oil and petroleum products since January.

He said Ghana has spent about 450 million cedis ($276 million) on fuel subsidies in 2011.

The price change effective from December 29, will see the cost of Liquefied Petroleum Gas (LPG) increase by 30 percent while petrol and diesel will go up 15 percent at pump.

Mould said the NPA would be monitoring crude oil prices and will not to increase or decrease pump prices if the average crude price stay within the $107-110 per barrel range.

He assured that government had taken palliative measures to reduce the effect of the increase on the people.

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