The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has said the country will need to revert to the old pump price of N97 per litre of Premium Motor Spirit, popularly known as petrol, next year.
Kachikwu said the nation’s economy could not adequately support the current price of N87 per litre.
He, however, added that the Federal Government might exit the subsidy regime if the current strategy invariably failed.
The minister stated this on Monday while defending his ministry’s projections as contained in the 2016 to 2018 Medium Term Expenditure Framework and Fiscal Strategy Paper before the Joint Senate/House of Representatives Committee on Finance, Appropriation and Banking, Insurance and other Financial Institutions.
Kachikwu appeared alongside the Minister of Finance, Mrs. Kemi Adeosun; Minister of National Planning, Senator Udo Udoma; Central Bank of Nigeria Governor, Godwin Emefiele; Chairman, Federal Inland Revenue Service, Mr. Babatunde Fowler; and Director-General, Debt Management Office, Dr. Abraham Nwankwo, among others.
On January 18 this year, the former Minister of Petroleum Resources, Mrs. Deizani Alison-Madueke, announced that the Federal Government had approved the reduction of the pump price of petrol by N10 due to the fall in the global price of crude oil.
She stated that in effect, PMS was to sell for N87 per litre and directed all filling stations and the regulatory authorities to effect the change of price immediately.
But on Monday, Kachikwu explained that the Federal Government was considering a reversal to N97 per litre in order to ensure that it would no longer fund the subsidy scheme.
He said the issue of total subsidy removal would come after the nation had been able to convince itself that the reversal to N97 would still be costing the government extra funds.
The minister admitted that the government would pay over N1tn to fund petrol subsidy this year, which according to him, included the N670bn paid to the major oil marketers for the 48 per cent of the product imported, and the 52 per cent brought in by the Nigerian National Petroleum Corporation.
Kachikwu said, “The total subsidy figure for 2015, when taken along with the NNPC’s subsidy payment, will be in excess of N1tn. The current pricing work we are doing has shown that there shouldn’t really be subsidy. The government doesn’t need to fund subsidy.
“There is energy around the removal of subsidy. Most Nigerians we talk to today will say that’s where to go. I have since left the dictionary of subsidy by going to price modulation, which is a bit more technical.
“The price of refined petrol today is N87. It was N97 before it was reduced and we really have to go back to that because we don’t really have the finance to fund it. There are lots of safety barometers between the N87 and N97per litre regime. The government does not have to fund subsidy and yet the prices would have been fairly close to what it is today.
“That is the first mechanism we are going to work. It is when that mechanism fails that we will begin to look at a total subsidy exit. We believe we can achieve that.”
On the issue of daily oil production target, Kachikwu noted that from August this year, the country had been exceeding two million barrels through stringent monitoring of the production process by getting quick fixes for instances of pipeline breaks.
He said the projection for next year was in excess of 2.4 million barrels per day, which would come from enhanced and increased production from NPDC field.
The minister said, “A lot of efficiency has really been applied in this regard. The NPDC will, for instance, be producing 300,000 barrels on its own, while other partners would process at least 2.2 million barrels.
“We would address issues of security and other impediments to the realisation of our target. We are looking at a collective and holistic handling of security issues between the NNPC and the oil majors with us taking the lead.”
On the oil price benchmark of $38 per barrel, Kachikwu said the projection was based on the outcome of the Organisation of Petroleum Exporting Countries’ conference, adding that the conservative price would suffice if the Federal Government did not interfere in terms of production cost.
He expressed confidence that the price of crude oil would increase as from early January to around $50 per barrel in spite of OPEC projections, adding that it might also hit $70 per barrel in 2017.
Speaking on strategy to reduce costs of governance, the Finance minister explained that the Federal Government had taken measures to ensure that all government revenues were accounted for.
She said the days when MDAs would generate revenue and spend 99 per cent out of it were over, because all expenditure would henceforth be captured.
Source – punchng.com