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Sylva Explains Reasons For Deregulation Policy

In the light of recent misguided comments and insinuations, the Federal Government has stated that it has been appropriate for the Ministry of Petroleum to explain the misconceptions on the issue of deregulation of petroleum products.

The Minister of State for Petroleum, Chief Timipre Sylva, in a statement signed personally in Abuja on Wednesday, stated that after a thorough examination of the economics of subsidizing PMS for domestic consumption, the federal government had concluded that it was unrealistic to continue with the burden of subsidizing PMS to the tune of billions of naira each year.

The Minister said that this was all the more true as much of the subsidy in question benefited the rich more than the poor and ordinary Nigerians.

However, the former governor of Bayelsa state said the government was aware of the likely impact of the PMS price increase on Nigerians and added that to mitigate the impact, the ministry would introduce the LPG programme, which would provide alternative sources of fuel at a lower cost to Nigerians.

According to the minister, deregulation means that the government will no longer be the main supplier of oil products. “But it will encourage the private sector to take on the role of supplier of petroleum products.

“This also means that market forces will henceforth determine prices at the pump. In line with global best practice, Government will continue to play its traditional regulatory role; ensure that this strategic commodity is not arbitrarily priced by private sector suppliers; a regulatory role not unlike that of the Central Bank of Nigeria in the banking sector; ensure that commercial banks do not charge arbitrary interest rates.

“Oil products are refined from crude oil. Therefore, the price of crude oil (the raw material) for the refining process will influence the price of the refined product.

“When crude prices fell, the government, through its regulatory functions, made sure that Nigerians could enjoy the benefits of lower crude prices by ensuring that the PMS was reduced.

“At that time, we indicated that the increase in crude oil prices would also be reflected in the pump.

“This is a necessary step taken by a responsible government in the general interest of Nigerians. One of the reasons why we have not been able to reach the level of investment in the refinery sector that we wanted was the burden of fuel subsidies. We must free up this investment space so that what has happened in the banking sector, in the aviation sector and in other sectors can also happen in the medium and small-scale oil sector.

“We can no longer avoid the inevitable and expect the impossible to continue.    There was no time for the government to promise to reduce the price of bombs and keep it permanently low.

“We must therefore ignore the antics of unscrupulous middlemen who want the status quo ante to be maintained at the expense of the general Nigerian public.    This very important political direction will not only attract investment and create jobs and opportunities, but will also free up billions of naira to develop infrastructure rather than enrich a few.