NNPC endorses Govt’s fuel subsidy removal from 2012

October 10, 2011 | Africa

NNPC_Towers_Abuja

The Nigerian National Petroleum Corporation (NNPC) yesterday endorsed the Federal Government’s proposal to phase out the administration of fuel subsidy starting from the 2012 fiscal year.

NNPC, Nigeria’s sole national oil company (NOC), administered all government’s joint venture (JV) agreements in the petroleum sector, whilst managing the country’s existing four refineries, said Nigeria ought not be involved in the exportation of crude oil when it could maximise the entire value chain in crude refining.

It said government’s planned removal of petroleum subsidy and subsequent deregulation of the downstream petroleum sector would mark the beginning of ‘investment galore’ in the country.

The Group General Manager, Public Affairs of the NNPC, Dr. Levi Ajuonuma, said Nigerians, and indeed, the organised labour movements in the country were actually fixated on the eventual prices of fuel in the aftermath of deregulation without considering the expected wholesome benefits from the exercise.

He explained that the prices of fuel would initially go up but would not remain up for long, adding that the whole essence of the exercise is to create a competitive environment where investments in petroleum refining will be attracted into the country.

Ajuonuma said government in its desire to ensure a successful implementation of the exercise, had created a strong social security net which contained a basket of social services which would cushion the initial shocks from deregulation, expressing confidence that the plan would sail through.

The Federal Government, had last week announced its plan to phase out fuel subsidy in 2012 when it presented its 2012-2015 Medium Term Fiscal Framework (MTFF) and Medium Term Expenditure Framework (MTEF) to the National Assembly.

In the document which was prepared by the Budget Office of the Federal Ministry of Finance, government hopes to save about N1.2 trillion next year alone, which it would employ to provide safety nets for the poor to ameliorate the effects that will come with the removal of subsidy.

According to him, “The deregulation exercise this time around will succeed because it is people oriented; President Goodluck Jonathan is first of all laying emphasis on the Nigerian masses and it is important for our people to understand that their apprehensions and criticisms and what people are saying is normal because nobody likes change either in the family or the social gathering, people will kick against it even though it will benefit them at the end of it.”

“At least we have testimonies of the telecom, aviation and even the media sectors of the country, now, you do not need to wait for Daily Times or the NTA to know what is on the news, there are private media outfits all over the country, same goes for the aviation and telecoms. The process is the same and will not change.”

Ajuonuma said: “In less than 18 months, we will see the differences because there is a new technology now called modular refining which allows you to refine in batches without having to build a big refinery, let us put these people managing the refineries to a test and they will sink or swim.”

He warned the organised labour over some inciting statements as regards the issue, saying: “What labour is saying is understood, however, we should not carry it too far with the kind of headlines on the pages of newspapers saying that government is fast tracking anarchy, that is totally unnecessary because deregulation or liberalisation as an economic policy is not new to us in Nigeria, we deregulated the telecoms, aviation and media sectors of the country and the question should be, are we better for it or not? And of course we are way better for it.”

While enumerating the benefits of the planned exercise, Ajuonuma queried: “Why shouldNigeria be exporting crude oil when we can refine every drop and barrel of our oil and take advantage of the entire value chain to our benefits likeBrazil andVenezuela who do not export their crude oil? We would know what to do with the bye products that come from the crude with the deregulation of the sector.

All these countries have plenty of refineries, gas gathering facilities and this is just the beginning of investment galore in the downstream because once government hands off and remove all these challenges that impede investment, you will see IOCs like Shell, Agip, ExxonMobil and the rest of them coming to build refineries because the process will be determined by market forces, the only thing that government will do in this regard is to make sure that the consumers are protected by making sure that we do not get adulterated or low standard fuel.”