Why payment of subsidy on petrol was discontinued – Ahmed

  • Says Dangote refinery may not reduce petrol price

Minister of Finance, Budget and National Planning, Zainab Ahmed has revealed that Nigeria’s revenue dropped by about 65 percent, which had necessitated the decision of President Muhammadu Buhari to discontinue the payment of petrol subsidy.

Ahmed, who spoke on NTA’s ‘Good Morning Nigeria’ programme on Monday which was monitored by our correspondent, noted that if the petrol subsidy returns it would lead to fuel scarcity because the government would not be able to pay marketers.

“What we have been doing is not sustainable. If we bring back fuel subsidies, we will fail because we will not be able to pay it and the problem of disputes with marketers will come back, then we will have queues again. We just cannot afford it and therefore this deregulation must be made to work.

“We appeal to Nigerians to understand that in the past when subsidy was done, we could afford to do it but right now, we cannot pay. Remember that right now our revenue has gone down by about 65 per cent. So, it is not business as usual. We cannot do what we used to do anymore,” she said.

She averred that Nigeria is currently facing difficult times like many other countries around the world, stating that the price of petrol would henceforth be determined by the price of crude oil.

The minister, however, disclosed that the decision remains that subsidy would not return, adding that it was unlikely that it would happen, when asked if subsidy would return if the price of crude oil bounces back to how it was in previous years, on NTA’s ‘Good Morning Nigeria’ programme on Monday.

She also said the Dangote Refinery being constructed may not significantly reduce the retail price of petrol, explaining that the refinery will sell its products at the international market price.

The Dangote refinery is expected to refine 650,000 barrels of oil per day (bopd) upon completion by 2021.

“What we are doing is enabling the petroleum sector to actually grow. There have been a number of refineries that have been licensed for several years. None of them was willing to start refining under the regime that we had were fuel was controlled,” the minister explained.

“The Dangote refinery is sitting within an export processing zone so they are insulated from that. When we buy fuel from Dangote, we will be buying fuel at the international market price. The only savings that we will be making is the savings of freight which is shipping.

“But we will still have landing cost; labour cost and the marketers will still have to put a margin. These refineries being those that are supposed to have come to operate can now come in because they are assured that when they produce, they can sell at market rate and recover their investments and make some reasonable profits.”

Ahmed explained that the deregulation of the downstream end of the petroleum sector means that more refineries will open, employ people and refined petroleum products will be readily available in different parts of the country rather than rely on the government for supply.

Also speaking on the programme, Timipre Sylva, the minister of state for petroleum resources, said the pump price of petrol will not drop significantly even if Nigeria is refining crude oil locally.

“The only difference that will happen if our supply was coming from in-country would have been the freight price. But whether it is coming from outside or coming from within, it will be about the same cost because when you import, the only difference is that you will have to pay the freight. But it is the same cost of crude and whether you are refining or not, you will have to pay the market price for the crude,” Sylva said.

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