A definite timeframe – November this year – has been set by the Federal Government for it to proceed with the full deregulation of the fuel prices at the pump, two months after the initial date of commencement.
If the policy goes ahead, government will stop paying the difference between the cost of importation and the pump price, known as subsidy, from the date. Petrol prices will now be subject to market prices, as is currently the case with diesel. At the current market conditions, fuel price may be as high as N100 a litre.
An end to the present subsidy arrangement will mean a closure of age long policy of successive governments. The government hopes to save its subsidy figures that stood at N654.76 billion in 2008, N255.74 billion in 2006 and N290.47 billion in 2007.
The decision to start full deregulation in November was part of the outcome of the meeting of the presidential committee on deregulation of downstream petroleum sector with the President last Thursday at the State House, Abuja, effectively shifting the commencement date two months forward.
A presidency source said the resistance put forward by organised labour is responsible for the change in date. Abdulwahed Omar, Nigeria Labour Congress (NLC) president, has been vehemently opposed to deregulation, positing that the Yar’Adua administration is embracing market forces at a time the rest of the world is backing away. He foresaw the policy coming with many ills.
“It is illogical for the Yar’Adua government to insist on chaining the country to these nebulous forces. All over the world, the primary concern of governments is the basic interest of the populace not the so called market forces. This is the kernel of our fundamental opposition to the de regulation of the downstream sector of the oil industry”, he had said.
“The solution,” according to the labour leader, “is to ensure the nation’s refineries work. Most component parts of the subsidy, including freight, demurrage, NPA charges, storage and evacuation costs are avoidable since they are all costs related to fuel importation. In other words, if the refineries work, what will be required is piping them to various destinations using the existing pipeline network in the country”, Omar said.
However, the government has secured the support of oil workers, particularly the two unions in the sector, namely the National Union of Petroleum and Natural Gas Workers (NUPENG) as well as the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN).
The committee at its 11 August meeting at the villa submitted to the president an action plan and roadmap detailing the processes to the removal of subsidy. The plan includes scrapping the Petroleum Products Pricing Regulatory Authority (PPPRA), discontinue the uniform pricing of petroleum products, scrappiing of Petroleum Support Fund, as well as stopping the issuance of license for importation of refined products.
Though a huge sum of money had been paid as subsidy this year, the Federal Government through the PPPRA still owes operators in the downstream sector about N70 billion. Remi Babalola, minister of state for finance, recently stressed the need for the full deregulation of the oil and gas sector pointing out that subsidies on petroleum products which stood at $4.5 billion in 2008 alone were no longer sustainable.
His words: “Oil remains our biggest blessing but the sector also faces enormous challenges. These challenges have discouraged private sector investments in new refineries and contributed to making existing refineries cost centres.
“Our aim is to maximise the opportunities in the industry, grow the downstream and deregulate the sector completely. Full deregulation of the oil and gas sector appears very imperative. This will encourage investment in refining and marketing infrastructure,” Babalola said.