| The Federal Government has insisted on sticking to its plan for a gradual and phased removal of subsidy on Premium Motor Spirit (PMS), otherwise known as petrol. The Minister of State for Energy (Petroleum), Mr. Odien Ajumogobia, (SAN), who made this known yesterday in Lagos, said the cost of sustaining the subsidy �has become unbearable and unsustainable�. The news about the gradual removal of subsidy is coming on a day Nigeria�s total debt stock was put at N2.7 trillion as at 30th of last June, indicating some 3.8 per cent or N1 billion increase over N2.69 trillion of March 31, 2008. Ajumogobia, who put the total projected cost of subsidy for this year at about N700 billion, said government was already working with other stakeholders with a view to getting their buy-in for the gradual removal of the subsidy. �We are trying to be more systematic and thorough in handling the subsidy issue. We cannot sustain it. We believe that we must go through deregulation of the price. We are engaging the stakeholders to work with us. The N700 billion subsidy is over N100 billion above this year�s capital vote. �The truth is that we must separate myth from reality. One of the myths is that if we have all our refineries working, prices of petroleum products would fall. Assuming all our four refineries are working at full capacity � that is 430,000 barrels per day, which had never worked more than 300,000 barrels per day � our average consumption is two and half times of what our full production capacity can generate. �And don�t forget that it would also take an average of 24 months to build a new refinery. There is a huge market for petroleum products but people are not investing because they can�t sell at market price to recoup their investments,� Ajumogobia said. He said the plan for the subsidy removal slated to begin in January 2009 would take into consideration all emotive and social issues that had in the past made implementation difficult. �We have embarked on a study to see how the vulnerable people who will in the end be on the receiving end of the phased deregulation be protected and since the issue of subsidy is such a sensitive one, we have involved all stakeholders and even the organised labour to deal with the fall-out,� Ajumogobia said. He said it is �reasonable� to expect removal of subsidy since those who benefit from the subsidy are not the poor. Ajumogobia, who accompanied the Finance Minister, Dr. Shamsudeen Usman, the Minister, National Planning Commission, Senator Sanusi Daggash, Director-General of the Debt Management Office, (DMO), Dr. Abraham Nwankwo, and some members of the Economic Management Team (EMT) to a media interactive section, urged Nigerians to understand the rationale behind the move and support it. Earlier, Nwankwo put Nigeria�s external debt stock as at last June at $3.6 billion, while the domestic debt was put at N2.3 trillion. This depicts some 3.8 per cent or N1 billion increase over N2.69 trillion of March 31, 2008. He explained that the current external debt stock was about 2.5 per cent of Gross Domestic Product, well below the international threshold of 30 per cent � �meaning that it is more than sustainable�. While breaking down the structure of the debt, he said 84 per cent of the external profile comprises concessionary loans from International Development Agency (IDA) and loans from soft windows of the African Development Bank (ADB) obtainable at 10-40 years moratorium and with commitment of 0.75 per cent per annum. �These are loans that go to fund education, health-related issues like HIV/AIDS and rural water supply-programmes with immediate social gains,� he said. Equally, the internal debt profile is described as sustainable and well below the critical threshold levels of 30 per cent and constitute about 84 per cent of the total debt. The Minister of Finance, Usman, noted that the macroeconomic development during the first half of 2008 suggested that Nigeria was on course for a strong growth by year-end. He said the strong growth would be under-pinned by strong performance of the non-oil sector, notwithstanding challenges in the areas of infrastructure especially power. He said growth in agriculture and other parts of the non-oil sector remained robust and estimates that they would grow by about 9 per cent, compared with 9.1 per cent in the corresponding period of 2007. He said the impact of the N700 billion capital budget vote released would soon begin to be felt. �They are not wasted as may be assumed by many, but bulk of it is still in the vault of the Central Bank of Nigeria. By October 2008, 75 per cent of the capital vote would have been utilised,� he said. Commenting on the proposed supplementary budget, the finance minister explained that it would be raised to finance specifically the proposed power emergency programme and transport. He said the government never expected to fund the emergency from the budget because of the huge cost outlay. He reiterated government�s determination to stabilise power at 3000 megawatts by the end of the year and raise the level to 6000 megawatts by December 2009 and subsequently 16,000 megawatts by 2011. |
Aug122008