OFFICE OF THE VICE PRESIDENT:

THE FUEL PRICING DEBATE: OUR STORY


Fellow Citizens: 

I have read the various observations about the fuel pricing regime and the attendant issues generated. All certainly have strong points.  

The most important issue of course is how to shield the poor from the worst effects of the policy.  I will hopefully address that in another note.
 
Permit me an explanation of the policy. First, the real issue  is not a removal of subsidy. At $40 a barrel there isn't much of a subsidy to remove. 

In any event, the President is probably one of the most convinced pro-subsidy advocates. 

What happened is as follows: our local consumption of fuel is almost entirely imported. The NNPC exchanges crude from its joint venture share to provide about 50% of local fuel consumption. The remaining 50% is imported by major and independent marketers. 

These marketers up until three months ago sourced their foreign exchange from the Central Bank of Nigeria at the official rate. However, since late last year, independent marketers have brought in little or no fuel because they have been unable to get foreign exchange from the CBN. The CBN simply did not have enough. (In April, oil earnings dipped to $550 million. The amount required for fuel importation alone is about $225million!) . 

Meanwhile, NNPC tried to cover the 50% shortfall by dedicating more export crude for domestic consumption. Besides the short term depletion of the Federation Account, which is where the FG and States are paid from, and further cash-call debts pilling up, NNPC also lacked the capacity to distribute 100% of local consumption around the country. Previously, they were responsible for only about 50%. (Partly the reason for the lingering scarcity). 

We realised that we were left with only one option. This was to allow independent marketers and any Nigerian entity to source their own foreign exchange and import fuel. We expect that foreign exchange will be sourced at an average of about N285 to the dollar, (current interbank rate). They would then be restricted to selling at a price between N135 and N145 per litre. 

We expect that with competition, more private refineries, and NNPC refineries working at full capacity, prices will drop considerably. Our target is that by Q4 2018 we should be producing 70% of our fuel needs locally. At the moment even if all the refineries are working optimally they will produce just about 40% of our domestic fuel needs. 

You will notice that I have not mentioned other details of the PPRA cost template. I wanted to focus on the cost component largely responsible for the substantial rise, namely foreign exchange. This is therefore not a subsidy removal issue but a foreign exchange problem, in the face of dwindling earnings. 

Thank you all.

VICE PRESIDENT YEMI OSINBAJO, SAN
May 13, 2016


http://www.premiumtimesng.com/news/headlines/203381-presidency-breaks-silence-explains-hike-fuel-price.html

But vice president the earlier you people put more weight on local production to meet our demand the better...



All I see is you people depending on imports

Vice president osinbade net worth is over a billion naira so we don't expect him to feel how the men and women of Nigeria feels.

Most intellectuals following the economy trends of this country know this....Just that the hardship on the common man is just too much....We want to eat our cake and have it... we want good economy and not really too ready to shoulder the pains..
May God help Nigerians in this trying period.
God Bless Nigeria

Osinbajo is learning fast, the next will be devaluation of Naira. Dr Ngozi Okonjo Iweala is back through a willing surrogate.


In recent times, demands for deregulation and subsidy removal have resurfaced, particularly after the Minister of Finance, Ngozi Okonjo-Iweala, while briefing the media shortly after presenting the 2015 budget, said that the Petroleum Products Pricing Regulatory had been directed to review the situation and proffer the advice to government on the issue.

At the end of the meeting with the Minister, fuel marketers and importers on Monday last week in Lagos, Executive Secretary of the Major Oil Marketers Association of Nigeria, Thomas Olawore, Olawore, said the N87 retail  fuel price was unsustainable.

“The on-going recovery of crude prices at the international market calls for complete deregulation of the downstream sector of the petroleum sector to permanently give the government, the marketers, Nigerians and all stakeholders the rest of mind,” Mr. Olawore said.

According to Mr. Olawore, when the recent devaluation of the Naira against the dollar and other international currencies are taken into consideration along with other indices, deregulation was the best way to go.

“The only way to end this recurring cycle of issue fuel supply disruption and price reviews is, complete deregulation of the downstream sector of the petroleum industry,” he insisted.

With deregulation, he said the country’s four refineries would be rehabilitated and made to refine petroleum products locally to replace the current arrangement where the bulk of the fuel consumed in the country are imported.
Besides, Mr. Olawore reiterated the call on the National Assembly to pass the Petroleum Industry Bill, which has been pending before the lawmakers for approval.

If the lawmakers think the PIB should be perfect before it is passed, he pointed out that the country may not get anywhere,

Though he acknowledged that the problems delaying the passage of the PIB were more about the upstream industry, Mr. Olawore said the downstream sector of the industry, which has minimal problems, was ready for the new law.

The Executive Secretary, PPPRA, Farouk Ahmed, did not say whether government was contemplating removing fuel subsidy when he was contacted for this story.

“Well I don’t know about removal of fuel subsidy by government. When crude oil price dropped to $47 and subsidy dropped to minus N10 on January 16, the price range was between N8 and N14.
“The subsidy level was still averaging N13 per litre when CBN, on January 18, adjusted its exchange rate, which was $171.36 (that is $168 plus banking administrative charges by commercial banks of 2 per cent). It later changed it to $199.

“That affected the price and a jump in subsidy level, from N14 to N31. The difference in the exchange rate between $171 and $199 is what government has to pay as subsidy per litre,” Mr. Farouk said.

The most important issue of course is how to shield the poor from the worst effects of the policy. I will hopefully address that in another note.

Why another note?, why not "THINK" of that first before taking this rash decision, do you think it was your fellow professors that put you and your goons in Aso Rock?, any way the Clock is tickling faster now and APC would soon be a thing of the Past.

Okay...