By Jeph Ajobaju, Chief Copy Editor
Timipre Sylva, Minister of State for Petroleum Resources, has echoed the demands of the World Bank and the International Monetary Fund (IMF) for Nigeria to remove subsidy from fuel to free up funds for infrastructure and discourage smuggling.
“I will say that my stand on fuel subsidy and deregulation is well known. I strongly believe that for this country to move forward, for our economy to make the progress it desires, we need to have a market-driven pricing of products.
“A situation where you produce something at a certain cost and you have to sell it at a lower cost to people because you are taking some of that burden off the people is not the best,” he told the News Agency of Nigeria (NAN) in Abuja.
Subsidy “is a very desirable thing but it is also not too sustainable”, in his view, because “you produce it for N10, you sell it for N5; tomorrow, you produce it again at N10, you add N5 from somewhere, produce it again at N10 and sell it for another N5.
“So, the losses increase and compound on a daily basis and those accumulated losses have brought us to where we are.”
Subsidy killed refineries
Sylva – as the NAN story is reported by Premium Times – said it is not true that importation of fuel products will stop if Nigeria’s refineries are working.
“Part of the reasons why the refineries were not working is subsidy because a refinery that is producing something at a certain cost and selling at a loss, how can it sustain itself.
“Over the years, the refineries couldn’t sustain themselves and all of them died. So, if you do not deregulate, you will find out that even the refineries, if you fix them today, they cannot be commercially operated because the refineries need maintenance and they need to run.
“If you are producing something and they are selling at a certain subsidised price, it cannot work; that is why you see that the sector is not growing at all.”
He noted that, for example, Aliko Dangote sited his refinery near the sea in Lagos to facilitate export and make `money for sustainability.
“If he sells within Nigeria in this subsidised environment, he will not break even. So, that is the way it is and we must look at it. I know that a lot of Nigerians think that we must carry on like this, but in the end, I think it is better for us to deregulate.”
Sylva described as unfortunate people’s perception of subsidy which makes them to fight the government “but the subsidy never favours them.”
He added: “It is actually in the interest of the common Nigerian to ensure that some people do not just profiteer on them, which is what has been happening.
“You must have heard of all the subsidy scams a few years ago; people were making billions on these same subsidies.
“And when you say you want to take it out, the common man is the one on the street but at the end of the day is it the common man that is benefiting? I don’t think they are the biggest beneficiaries.”
Benefits of subsidy removal
He said all fuels connected to the common man have been deregulated.
“Kerosene, which the common man uses to cook in a stove and use in the village to burn fire wood, is deregulated. Diesel that is used to move the trucks that move food from farm to market is deregulated; but petrol, which is the preferred fuel for big people, is the fuel that has defied deregulation.
“But at the end of the day, I believe that it [removal of subsidy] is better for us because if we are able to deregulate, then we can save money.
“First, you can imagine the savings we will make as far as foreign exchange (forex) is concerned and of cause, it will bring down the pressure on forex.
“People will be able to access forex for imports, government will not be the one providing foreign exchange for the importation.”
Sylva explained that once Abuja stops fuel subsidy all the money that will be gained, which is over a trillion naira yearly, instead of being burnt in cars, will be used for development.
“You can imagine how much money the federal and state governments will have at their disposal if there is deregulation.”