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Nigeria,
a oil-rich nation,
and
one of the current
twelve (12) members of
Organization of Oil
Exporting Countries (OPEC) has announced the removal of subsidy
on her Premium Motor Spirit (PMS) or gasoline as a step towards deregulating her oil
industry
Nigeria's Petroleum Products Pricing Regulatory Agency (PPPRA)
made the announcement through a press statement signed by the body's
executive secretary, Mr. Reginald Stanley. The subsidy removal is
effective from January 1, 2012.
Up
until now, Nigerian government have subsidized the importation and
distribution of PMS to keep the price that the commodity is sold to the
masses at around NGN 65 (or 44 cents). Approximate pump prices of PMS or
gasoline in different countries can be found at:
Gas prices
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With the subsidy removed, the pump price of PMS or gasoline in Nigeria
may jump to at least twice the price before subsidy removal. Gas prices
are, now, expected to fluctuate between about NGN 135 to NGN 145 (i.e.
between 85 to 90 US cents),
making the Nigerian masses to be paying similar gas prices as people in
the United States and other developed countries with higher take-home
incomes. This is capable of increasing the
hardship of the ordinary people on the Nigerian street. Furthermore, the
hike in petrol price is going to have spiral effect on all other goods
and services in the country. The cost of living will go up drastically.
Nigeria is the 12th largest producer of petroleum in the world and the
8th largest exporter, and has the 10th largest proven reserves. The
country is the 6th oil producer within the OPEC, an organization it
joined in 1971. Despite these vast crude oil reserve, Nigeria depends on
importation of refined petroleum products from overseas. Nigeria
extracts crude oil using national structures and third party oil
companies such as Exxon Mobil, Shell AGIP, etc and export the crude
overseas. Refined petroleum products are imported back to Nigeria.
Petroleum subsidies are given to the business men (oil importers) to
cover some of the expenses that the Government would not want to be
passed on to the masses. However, the subsidy scheme has been froth with
corruption leading to very huge amounts (of 2 to 3 magnitudes originally
budgeted for subsidies) being paid out annually by the government.
Nigeria refines a very small amount of the gasoline it uses domestically
because her four (4) government run refineries (3 in Southern Nigeria
and 1 in Northern Nigeria) are not functioning
properly. Also, many private refineries granted licences are yet to start
operations.
Government reasons for removing subsidy is to check wastage and divert
the money into fixing the refineries. It is also meant to deregulate the
oil industry and encourage more competition and efficiency. While many Nigerian citizens are
not rigidly against subsidy removal, they have expressed lack of trust
in the government using the money saved from the subsidy
removal judiciously and for the intended purposes. It is believed that the saved funds may end up in
the pockets and foreign bank accounts of influential people in the
society. This lack of trust has been developed over time as the various
past governments have reneged on their numerous promises to the
citizenry.
Many Nigerian citizens, labour associations and others believe
that the first step towards removing oil subsidy should have been to
refine domestic petrol locally and have the pump price lowered. This
could have been achieved by fixing
the government's four refineries making them to refine crude oil to
designed capacity and granting licences and facilitating startups of
private refineries. If these actions are carried out prior to removing
subsidy on importation and distribution, they will mitigate against
drastic rise in pump price.
How the various stakeholders in the
country react to the subsidy removal will be determined in the next few
days. The text of the PPPRA statement,
as obtained from their website is produced below. The actual tatement is
also inserted as an image file below.
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Full text of press release from the PPPRA:
PPPRA Announces Formal Removal of Subsidy on Premium Motor
Spirit (PMS)
Following extensive consultation with stakeholders across the
nation, the Petroleum Products Pricing Regulatory Agency (PPPRA)
wishes to inform all stakeholders of the commencement of formal
removal of subsidy on Premium Motor Spirit (PMS), in accordance
with the powers conferred on the agency by the law establishing
it, in compliance with Section 7 of PPPRA Act, 2004.
By this announcement, the downstream sub-sector of the petroleum
industry is hereby deregulated for PMS. Service providers in the
sector are now to procure products and sell same in accordance
with the indicative benchmark price to be published forthnightly
and posted on the PPPRA website.
Petroleum products marketers are to note that no one will be paid
subsidy on PMS discharges after 1st January 2012.
Consumers are assured of adequate supply of quality products at
prices that are competitive and non-exploitative and so there is
no need for anyone to engage in panic buying or product hoarding.
The PPPRA in conjunction with the Department of Petroleum
Resources (DPR) will ensure that consumers are not taken advantage
of in any form or in any way.
The DPR will ensure that the interest of the consumer in terms of
quality of products is guaranteed at all times and in line with
international best practice.
In the coming weeks, the PPPRA will engage stakeholders in further
consultation to ensure the continuation of this exercise in a
hitch-free manner.
Signed:
Reginald Stanley
Executive Secretary, PPPRA.
Related News Items/websites:
Petroleum Products Pricing Regulatory Agency (PPPRA)
Retail Prices of Gasoline in different countries
Fossil Fuels - Crude Oil (Petroleum)
Oil-producing countries (Wikipedia)
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