Financial Energy Review
The Minister of State for Petroleum Resources, Chief Timipre Sylva, yesterday warned that succumbing to pressure to reinstate the fuel subsidy recently halted by the federal government will cause the return of fuel queues throughout the country.
Speaking on a live TV programme, the minister explained that with the loss of over 60 per cent government revenue, it was impossible to continue with the subsidy regime, which he said was drying up government earnings.
Sylva said that the government was able to marshal enough evidence to convince the labour on why it was impossible to retain the subsidies on petrol and electricity, noting that deregulation is the only way to go to draw investment from the private sector.
“If your earnings have dropped by 60 per cent, then you have to do something about it. We showed them everything and they saw with us that it was not possible for us to continue.
“The alternative was to go back to subsidy and have scarcity. If the product is imported at a certain price and sold at a loss, it means somebody was bearing that difference. It was becoming unbearable to us,” the minister said.
On how the federal government convinced labour to shift grounds, he said: “I applaud the labour leaders who put Nigeria first on that negotiation table. First, we had to be very truthful about the situation in the country, and globally. The government could no longer go on with subsidy because there simply was no money”
He stated the labour leaders agreed because they saw the sincerity on the part of the government.
“It was a very painful decision. But there was no alternative. So, we have to bite the bullet as a country,” he noted.
On the two-week deadline issued by the labour leaders, Sylva said although the organised labour gave the federal government a timeline, the functionality of the refineries cannot be achieved within two weeks.
“I don’t think labour is expecting to see all the refineries fixed in two weeks. Labour is quite realistic. What we told them was that we understand that fixing of our refineries has been a big problem. When we look at it from the historical perspective, the non-functioning of the refineries was because there was subsidy.
“These refineries could not function optimally and commercially. But with deregulation now, we believe that the refineries can now function optimally.
“We believe that this policy (subsidy) direction will help the functioning of the refineries, as well,” Sylva explained.
The minister added that the federal government gave the labour leaders a clear timeline for fixing the refineries, saying that with falling oil prices , government revenue had hit a record low.
“Oil prices came down and production came down as a result of OPEC cuts. We are almost producing half of what we used to and selling at less the price we used to.
“In a situation like that, labour saw the truthfulness. It was a painful decision. Now, there is a consensus that this is the way to go. Deregulation is necessary because it will grow the refining sector. Nobody comes with investment and sells at subsidised rate” he stressed.
Sylva reiterated that though at a time the federal government was subsidising forex for the Nigerian National Petroleum Corporation (NNPC) to import products, the practice has now stopped while the market is fully deregulated.
