The Minister of State for Petroleum, Dr. Emmanuel Ibe Kachikwu yesterday said the Federal Government will not scrap the Petroleum Support Fund (also known as subsidy) but will, instead, embark on price modulation.
He denied saying the price of petrol will go up in January.
Addressing a press conference in Abuja, he said the Nigerian National Petroleum Corporation (NNPC) will alongside the Petroleum Product Pricing Regulatory Agency (PPPRA) sit to determine the new template to arrive at a new price which will be subject to quarterly review in line with the price of crude oil.
He explained that government is planning to use N87 and N97 as a ceiling for the price modulation at every given time instead of fixing the fuel price without basis.
Kachikwu said: “ I did not say that refine product will sell N97 next year. That is not what I said. I said between a bound of N87 and N97. We are going to look at the prices.
“Today the price is close to N87 so there might be no need to change prices. By January, it may well go up slightly. By February it may well go up slightly. But March it may well go up slightly; by April, it may come down.
“So it is all a dynamic of what the price of crude is. So I have not put a static figure; myself and PPPRA will sit down to do the calculation to be able to announce what the PMS will sell for in January. We do not anticipate any major shift in the cost of crude today.”
The minister who lamented that the Federal Government spent an unbearable over N1 trillion on fuel subsidy this year said NNPC has to take measures to whittle some of the cost elements of the subsidy template.
He said government will now look at how to reduce its allocation to the Petroleum Equalisation Fund (PEF) and foreign exchange.
He said: “Now what we are doing is review the PPPRA template – how we can whittle down some of the cost elements – the cost for clearing, allocation for PEF? We will reduce – foreign exchange provision (what do we do with the foreign exchange so that some stability in the exchange rate (is acheived?)
“ It is a key component that when you deregulate, you are back to square one or so. So we are looking at how do we provide allocation in the oil industry so that there is certainty in terms in the regime for FS and that saves you the exchange component in the whole analysis.”
He said President Muhammadu Buhari has resolved that government will get a technical partner to repair and run the refineries and bring out its investment.
However, the Nigeria Extractive Industries Transparency Initiative (NEITI) has said removal of the subsidy will free over N700 billion annually which can be channeled to provision of infrastructure like roads, education, health service, power, security, creation of jobs and basic benefits for the poor in the society.
The statement said that while addressing a Policy Roundtable on Subsidy Removal Debate organized by the Shehu Musa Yar’Adua Centre in Abuja, the Acting Executive Secretary, Dr Orji argued; “From NEITI’s independent audit report, over N4 trillion has been paid as subsidy to marketers from 2006-2012. The breakdown of the subsidy shows that N2.197Billion was paid as subsidy in 2006. This rose to N236.64Billion in 2007 and N360.1Billion in 2008. In 2009 the country paid N198.1Billion as subsidy for petroleum products and in 2010 the subsidy payment rose to N416.45Billion. The payments skyrocketed to N1.9 trillion in 2011. Payments of oil subsidy declined to N690Billion in 2012 following the subsidy protests across the country in January of that year”.