The Minister of State for Petroleum Resources, Timipre Sylva has clarified the price regulation policy of the Federal Government and the hike in the price of petrol, stating that at no time did it promise to keep the price of petrol permanently low.
Sylva also said government had concluded that it could no longer bear the burden of petrol subsidy in a statement titled: ‘Deregulation: The facts and the reasons behind the policy’.
The explanation followed criticisms by the Nigeria Labour Congress, NLC, United Labour Congress, ULC, other labour bodies and trade unions over the uncertainty in the deregulation policy, while they also called on government to reverse the recent hike in the price of petrol.
Sylva said “after a thorough examination of the economics of subsidising petrol for domestic consumption, the federal government concluded that it was unrealistic to continue with the burden of subsidising PMS to the tune of trillions of naira every year, more so when this subsidy was benefiting in large part the rich, rather than the poor and ordinary Nigerians,” he said.
The minister said deregulation means that government will no longer continue to be the main supplier of petroleum products but will encourage the private sector to take over the role of supplying the products.
“This means also that market forces will henceforth determine the prices at the pump. In line with global best practices, government will continue to play its traditional role of regulation to ensure that this strategic commodity is not priced arbitrarily by private sector suppliers,” Sylva said.
He likened the regulatory function to the role played by the Central Bank of Nigeria in the banking sector, “ensuring that commercial banks do not charge arbitrary interest rates.”
“Petroleum products are refined from crude oil. Therefore, the price of crude (the feedstock) for the refining process will affect the price of the refined product.
“When crude oil prices were down, government, through its regulatory functions, ensured that the benefits of lower crude oil prices were enjoyed by Nigerians by ensuring that PMS was lowered. At that time, we indicated that an increase in crude oil prices will also reflect at the pump,” the minister explained.
He said one of the reasons the country had been unable to attract the level of investments desired in the refining sector had been the burden of fuel subsidy.
He maintained that government is mindful of the likely impact that higher PMS prices would have on Nigerians, adding that to alleviate this, it is working very hard to roll out the auto-gas scheme which would provide Nigerians with alternative sources of fuel and at a lower cost.