The Nigerian government is brushing off opposition and sticking to its policy of allowing premium motor spirit pump prices (pms) to exhibit the band that reflects the international crude oil price
In the first three months of 2020, the Nigerian National Petroleum Corporation, the National Oil Company and pms’ main supplier, said it spent an average of up to 101,65bn on subsidising petroleum products, 43,31bn in January, 20,68bn in February, and 37,66bn in March.
As of April 2020, the Petroleum Products Pricing Regulatory Agency (PPPRA) had adjusted the PMS price to reflect the international crude oil price.
Timipre Sylva, junior minister petroleum, said after thorough examination of the economics of subsiding pms for domestic consumption, the Nigerian government concluded that it was unrealistic to continue with the burden of subsidising pms to the tune of trillions of naira every year.
He added that deregulation means the government will no longer remain the main supplier of petroleum products, but will encourage the private sector to take over the role, and will allow market forces to determine the pump price.
“Government will continue to play its traditional role of regulation; to ensure that this strategic commodity is not priced arbitrarily by private sector suppliers; petroleum products are refined from crude oil, therefore the price of crude (the feedstock) for the refining process will affect the price of the refined product,” he said.
Sylva said the burden of fuel subsidy was one of the reasons Nigerian was unable to attract the level of investment it desires into the refining sector.
“We need to free up that investment space so that what happened in the banking sector, aviation sector and other sectors can happen in the midstream and downstream oil sector. In addition to attracting investments and creating jobs and opportunities, this very important policy direction will free up trillions of naira to develop infrastructure.”
He said the Nigerian government is mindful of the likely impact that higher pms prices would have on Nigerians, and to alleviate the hardship, it is “Working very hard to roll out the auto-gas scheme, which will provide Nigerians with alternative sources of fuel and at a lower cost.”