Nigeria’s government on Thursday said the state would not, through the Nigerian National Petroleum Corporation (NNPC), continue to bear the about N120 billion monthly subsidy burden on petroleum products, stressing that the burden had become too heavy to bear.
The federal government stated that with the conclusion of talks with the organized labour on how to cushion the effects of the deregulation of the oil sector, market forces would be allowed to determine prices of petroleum products.
Speaking during a ministerial media briefing in the presence of the Minister of State for Petroleum Resources, Timipre Sylva, at the State House, Abuja, the NNPC Group Managing Director, Mele Kyari, said the corporation currently subsidizes the cost of Premium Motor Spirit (PMS) with about N120 billion ($263,248 million) monthly.
Kyari explained that the NNPC absorbs the cost differential which is recorded in its books, adding that while the actual cost of importation and handling charges amounts to N234 per liter, the government is selling at N162 per liter.
He, however, said that the NNPC can no longer afford to bear the cost and that sooner or later Nigerians would have to pay the actual cost for the commodity.
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The GMD, who avoided calling the payment a subsidy, said the NNPC pays between N100 to N120 billion a month to keep the pump price at the current levels, insisting that market forces must be allowed to determine the pump price of petrol in the country.
On the share of petroleum revenue which accrues host communities, the NNPC boss remarked that in the last 20 years the communities have been agitating for 10 percent of profits from operating companies without putting into consideration situations when companies do not make any profit.
Kyari said the government decided on two and a half percent, explaining, “What we did was to zero down the percentage of operational expenditure. If you look at the companies operating in this country, operational expenditure is huge that is why we said two and a half percent will be good.”
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The Minister of State for Petroleum, Timipre Sylva, who avoided answering questions on the agitation from the host communities for a greater share of petroleum revenues, however, said that the draft bill on Petroleum Industrial Bill, PIB, was already with the National Assembly.
He said that the lawmakers may decide to adjust the 2.5% of operating cost that the FGN has proposed as host communities’ revenue share, adding that “Whatever needs to be done, will be done at the National Assembly, the draft bill is before them”.
The FGN team did not share details of any mitigatory measures proposed to or agreed with the labour unions. It remains to be seen whether labour would agree to the removal of the fuel subsidy and if it does not, whether the Federal Government would remove the subsidy and risk labour unrest.
