Buhari Scraps Fuel Subsidy, Cuts Petrol Price to N85 Per Litre
President Muhammadu Buhari has approved the removal of the Petroleum Support Fund, also known as fuel subsidy.
The Nigerian Government announced this on Friday.
In a chat with journalists at the Port Harcourt refinery where he had spent Christmas inspecting the facility, the Minister of State for Petroleum, Ibe Kachikwu, said the government could no longer pay the subsidy due to the fraud tainting the scheme.
Mr. Kachikwu, who is also the Group Managing director of the Nigerian National Petroleum Corporation (NNPC), also added that the government could no longer afford the payment due to the dip in its revenue, caused by the drop in crude oil prices.
He said a new pricing template he signed off on Thursday effectively removed the payment of subsidy on petrol and that oil marketers would be informed of the development in the coming days.
The official price of petrol is N87 but it is sold for higher prices in many states of the federation.
When pressed on what the new price of petrol would be following the removal of the subsidy, Mr Kachikwu said it would sell for below the current official price, maybe as low as N85 per litre.
“It (new pricing regime) is out,” the minister said. ”I signed off on it yesterday (Thursday). I imagined that in the next couple of days the marketers would get advice on that. The nice thing about the PPPRA, where I signed up on it yesterday is that the price will be far below N87,” he said.
“So for the first time, people will understand that the pricing modulation I was talking about is not a gimmick. It is for real. We have gone to find out how we will be able to fluctuate this market to reflect what the reality of the crude market is. The objective is that one, we cannot afford to continue to subsidise.
“We can’t even understand where those subsidies were going to. There are a lot of fraud elements in it so we need to cut that off.
“The second is the earning capacity of the Federal Government is deteriorating by the day with lower prices of crude and come out more,” he said
On Tuesday, President Muhammadu Buhari told a joint session of the National Assembly that he had directed “the Petroleum Products Pricing Regulatory Agency (PPPRA) to adjust its pricing template to reflect competitive and market driven components” that would keep the price of petrol selling at “N87 per litre for now.”
According to Mr Kachikwu, the President’s comment was informed by the analysis that was done that put the price at below the official price of N87.
“But in applying that where we landed when we did the analysis for the very first time was about N85 or N86 so it is below N87.
“And maybe the first price that will come will reflect it. That was why Mr. President said that prices will be N87 for now. And that is what we have in mind,” he said.
The announcement on fuel subsidy removal came two days after the Nigerian Labour Congress threatened it would vehemently oppose any cut on the subsidy regime.
At the end of its Central Working Committee meeting in Abuja, the NLC said the discordant pronouncements from government officials on plans to cut subsidy was creating panic and confusion in the system, even as it reaffirmed its opposition to any fuel price increase.
An attempt by the government to cut fuel subsidy in 2012 led to what came to be known as the #OccupyNigeria protest.
Leaders of the then opposition Action Congress of Nigeria (ACN), including Asiwaju Bola Tinubu vehemently opposed the subsidy removal and mobilised public outrage against the government when in the early hours of January 1, 2012, then President Jonathan announced the removal of subsidy from petroleum products.
The then president’s New Year announcement meant that PMS, which sold for N65 a litre – with subsidy – would go for N141, more than a hundred per cent increase.
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