Vice President Yemi Osinbajo in a statement titled ‘The
Fuel Pricing Debate: Our Story’, has explained the hike in fuel price!
Fellow Citizens:
I have read the various observations about the fuel pricing regime and
the attendant issues generated. All certainly have strong points.
The most important issue of course is
how to shield the poor from the worst effects of the policy. I will
hopefully address that in another note.
Permit me an explanation of the policy.
First, the real issue is not a removal of subsidy. At $40 a barrel there
isn’t much of a subsidy to remove.
In any event, the President is probably one of the most convinced pro-subsidy advocates.
What happened is as follows: our local consumption of fuel is almost
entirely imported. The NNPC exchanges crude from its joint venture share
to provide about 50% of local fuel consumption. The remaining 50% is
imported by major and independent marketers.
These marketers up until three months
ago sourced their foreign exchange from the Central Bank of Nigeria at
the official rate. However, since late last year, independent marketers
have brought in little or no fuel because they have been unable to get
foreign exchange from the CBN. The CBN simply did not have enough. (In
April, oil earnings dipped to $550 million. The amount required for fuel
importation alone is about $225million!) .
Meanwhile, NNPC tried to cover the 50%
shortfall by dedicating more export crude for domestic consumption.
Besides the short term depletion of the Federation Account, which is
where the FG and States are paid from, and further cash-call debts
pilling up, NNPC also lacked the capacity to distribute 100% of local
consumption around the country. Previously, they were responsible for
only about 50%. (Partly the reason for the lingering scarcity).
We realised that we were left with only
one option. This was to allow independent marketers and any Nigerian
entity to source their own foreign exchange and import fuel. We expect
that foreign exchange will be sourced at an average of about N285 to the
dollar, (current interbank rate). They would then be restricted to
selling at a price between N135 and N145 per litre.
We expect that with competition, more
private refineries, and NNPC refineries working at full capacity, prices
will drop considerably. Our target is that by Q4 2018 we should be
producing 70% of our fuel needs locally. At the moment even if all the
refineries are working optimally they will produce just about 40% of our
domestic fuel needs.
You will notice that I have not
mentioned other details of the PPRA cost template. I wanted to focus on
the cost component largely responsible for the substantial rise, namely
foreign exchange. This is therefore not a subsidy removal issue but a
foreign exchange problem, in the face of dwindling earnings.
Thank you all.
The NNPC had on Thursday announced an increase in petrol prices from N86.50 to N145 per litre.
The statement reads in part:
Nigerians on social media are having their say on the VP’s stance: