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How FG Plans to Remove Wasteful Fuel Subsidy

Every year Nigeria spends whopping billions of naira subsidising premium motor spirit (PMS), commonly known as petrol, with its often criticised claim that it is protecting the common man from the likely burden of a free market price. However, the federal government has said it had not foreclosed the possibility of removing the subsidy on the product, as it has a plan around it.

In an interview with Arise News, a sister broadcast station of THISDAY, on the sidelines of the 50th World Economic Forum (WEF) in Davos, Switzerland, the Minister of State for Petroleum Resources, Chief Timipre Sylva, gave a hint on the plan for the subsidy removal. He also spoke on other issues including Nigeria’s position on climate change advocacy, the protracted Petroleum Industry Bill (PIB), OPEC production cuts, the fate of NNPC in the PIB, amongst others. Excerpts:

What are your expectations from this World Economic Forum?

Quite a lot, this is a forum where global policies are shaped and Nigeria needs to be here, if not the world will move on without you. That is why we have come. We have put our perspective on the table, and I think the world will begin to consider our perspective. One of those areas, if you ask me, is climate change. The world has been talking about climate change and movement to renewables, we cannot join that race as yet, because we have not attained our base load. We need to at least transit to gas before we join the race to renewables and we are putting that on the table for the world to understand and to know that they cannot expect us to join the race to renewables as yet.

The view of OPEC on climate change is that there can’t be a better environment and still there is use of fossil fuel as it were. Environmentalists say oil producing states are not listening. What are your thoughts on this?

It is not as if oil producers are not listening at all, what we are saying is that gas should be used as a transition from fuel. The argument is not really about renewables, it is about carbon emission. Of course, gas produces lower carbon emission. So, we should try to transit to gas before we join the race to renewables. The West have gotten there but we have not quite gotten there yet. If they are spending a trillion for example in Europe to subsidise renewables then we wonder why that kind of money is not being spent in places where the emissions are produced.

Now, looking at the oil prices and the dynamics especially with geopolitical hotspots sprouting every now and then, is OPEC likely to extend the additional cuts for the first quarter here?

Well, it is very likely. It is still premature for me to discuss that because we will go to Vienna in March and then we will take the decision. But we believe that the OPEC+ will hold, and if it holds, then the policies will also hold. And right now we don’t see any reason why we shouldn’t sustain the cuts.

Now, coming back home in Nigeria, some have said the PIB is dead, others say it is comatose. What do you say of this bill that has refused to see the light of day?

It is unfortunate that this bill has been in the process of passage for a long time now, but I can tell you authoritatively that we have come to the end of the waiting. We believe that by the middle of this year, the PIB will be passed. You know, the government today shares a good relationship with the legislature, we are working together, we are on the same page and there is a consensus that this bill needs to be passed now.

Now, environment activists are calling for an end to the oil subsidy. The IMF has also said it is wasteful. Why is it so difficult for Nigeria to take the bull by the horn on this issue?

Well, I will just say that the IMF has never always been right. We know that they have said that before; they took us to the path of Structural Adjustment Programme and you can see where we are now.

Definitely we believe that subsidy is something that is really draining the purse of the country, but right now, it is really not the best time for us to look at removal of subsidy, because it is going to put a lot of burden on the common man. But we have found a way around it. We are trying to see how we can introduce a transitional fuel.

I mean, we want to move a lot of vehicles on Nigerian roads to gas, so that after a while people will not really bother so much about PMS, and then we can take out subsidy on PMS.

Will NNPC be privatised or not? A fully-owned national oil company model is seen as outdated and not the efficient way. Why is Nigeria not budging on this?

In the PIB law, NNPC will be incorporated and the joint ventures (JVs) will also be incorporated so that they can go out there and get funds through their activities. It is not necessarily going to be privatised in a way people are looking at it, but it is going to be incorporated.