VICE PRESIDENT EXPLAINS SUBSIDY REMOVAL

Nigeria’s Vice President, Prof. Yemi Osinbajo has swiftly responded to the ongoing saga surrounding Federal Government’s decision to remove fuel subsidy and consequently increase the pump price of petroleum products.

Buhari-Osinbajo-Udoma

In a bold and daring manner, the Federal Government had on Wednesday, May 11, 2016 officially removed fuel subsidy, giving importers the latitude to sell at any price but not above N145.

Read his explanation below:

Fellow Citizens:

I have read the various observations about the fuel pricing regime and the attendant issues generated. All certainly have strong points.

The most important issue of course is how to shield the poor from the worst effects of the policy.  I will hopefully address that in another note.

Permit me an explanation of the policy. First, the real issue  is not a removal of subsidy. At $40 a barrel there isn’t much of a subsidy to remove.

In any event, the President is probably one of the most convinced pro-subsidy advocates.

What happened is as follows: our local consumption of fuel is almost entirely imported. The NNPC exchanges crude from its joint venture share to provide about 50% of local fuel consumption. The remaining 50% is imported by major and independent marketers.

These marketers up until three months ago sourced their foreign exchange from the Central Bank of Nigeria at the official rate. However, since late last year, independent marketers have brought in little or no fuel because they have been unable to get foreign exchange from the CBN. The CBN simply did not have enough. (In April, oil earnings dipped to $550 million. The amount required for fuel importation alone is about $225million!) .

Meanwhile, NNPC tried to cover the 50% shortfall by dedicating more export crude for domestic consumption. Besides the short term depletion of the Federation Account, which is where the FG and States are paid from, and further cash-call debts piling up, NNPC also lacked the capacity to distribute 100% of local consumption around the country. Previously, they were responsible for only about 50%. (Partly the reason for the lingering scarcity).

We realised that we were left with only one option. This was to allow independent marketers and any Nigerian entity to source their own foreign exchange and import fuel. We expect that foreign exchange will be sourced at an average of about N285 to the dollar, (current interbank rate). They would then be restricted to selling at a price between N135 and N145 per litre.

We expect that with competition, more private refineries, and NNPC refineries working at full capacity, prices will drop considerably. Our target is that by Q4 2018 we should be producing 70% of our fuel needs locally. At the moment even if all the refineries are working optimally they will produce just about 40% of our domestic fuel needs.

You will notice that I have not mentioned other details of the PPRA cost template. I wanted to focus on the cost component largely responsible for the substantial rise, namely foreign exchange. This is therefore not a subsidy removal issue but a foreign exchange problem, in the face of dwindling earnings.

Thank you all.

VICE PRESIDENT YEMI OSINBAJO, SAN
May 13, 2016

 

 

Credit: Ekekeee.com

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About Dr. Ken

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24 Responses to VICE PRESIDENT EXPLAINS SUBSIDY REMOVAL

  1. Esther says:

    In Nigeria, there are stories, history and hysteria. God give us the grace to follow!

  2. Yemi says:

    Honestly APC members and supporters at this time should be sober and bow their heads in shame because it is the same thing they protested against when Jonathan’s administration removed subsidy and increased the PMS price as well as paid minimum wage. .

    The likes of El Rufai and co. protested vehemently. But today APC has no clue other than to do what Jonathan did.

    Please you guys should apologize to Jonathan for your misbehaviors ASAP!

  3. Akpan says:

    Mr. Vice President, with all due respect, can you also explain this report from Sahara Reporters:

    After months of insisting that he had no plans to devalue the naira, President Muhammadu Buhari has caved to pressure to change course; SaharaReporters has learned from an exclusive briefing by a few top aides of the president.

    A day after the Buhari administration increased the price of the pump price of fuel by 67%, from N86.5 to N145 a liter, our sources disclosed that Mr. Buhari has also agreed to demands by the International Monetary Fund (IMF) that he significantly devalues the Nigerian currency. Our sources indicated that the naira would be pegged at N290 to one dollar. The current official rate is about N200 to a dollar.

    Our sources said Mr. Buhari and his economic team took the decision to accept the IMF’s terms for funds that the Nigerian government wants to access to bridge a critical shortfall in revenue occasioned by a drastic decline in oil revenues. An administration insider told SaharaReporters that Nigeria could receive as much as $3 billion in credit facilities from the IMF.

    “The truth is that Nigeria cannot operate without sourcing credit from the IMF,” said one of our sources, an economic adviser to Mr. Buhari, who spoke on condition of anonymity. “And the IMF was adamant that we must devalue before they can discuss extending credit to us,” he added.

    Curiously, administration officials took the decision to devalue the naira without the input of the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, another source revealed. An official of the CBN confirmed to Saharareporters that bank executives were kept in the dark about the discussions that led to the Buhari administration’s decision to devalue the naira. “Some of us here [the CBN] are not opposed to devaluation, given our country’s present circumstances,” the source said, adding that it was the CBN’s function to pilot Nigeria’s monetary policies.

    One of our sources pointed to the fact that the naira has been weakened in the parallel market, where it now sells at N360 per dollar. “The government cannot continue to operate under the illusion that the naira is stronger than it is. The only problem is that we did not start early enough to admit to Nigerians how bad the financial outlook was,” the source added.

    The Nigerian economy has been pummeled by falling oil earnings that have led to a near collapse of the economy. The IMF had long indicated its readiness to support Nigeria’s economy with credit liquidity but insisted on Nigeria devaluing its currency. President Buhari had insisted on numerous occasions, before and after his election, that he would never devalue the naira.

    It is unclear how Mr. Buhari and members of his economic team plan to justify the about-turn on devaluation and other policy somersaults. After initially vowing to reduce the price of fuel, the government yesterday announced a significant hike in fuel price. The administration also set to announce a 10% increase in value-added tax (VAT), another indication that the Buhari government was embracing the kind of liberalization pushed by the IMF.

    To compound dwindling oil prices, militants in the oil-rich Niger Delta region have crippled oil exports substantially after bombing oil pipelines and issuing threats to oil companies to leave the region.

    Last week, several oil companies evacuated essential staff from the region’s offshore platform leading to a reduction in daily oil outputs from 2.2 million barrels a day to 1.3 million barrels a day.

    • Okon says:

      And how do you explain the 13 million naira requested by Information Minister Lai Mohammed for a trip to China?

  4. Ayuba says:

    The present administration owes Nigerians an apology for this act of dictatorship over the removal of fuel subsidy.

    They can’t just wake up and remove the fuel subsidy without prior notification to the masses and without any provision to cushion the effect.

    This is an act of dictatorship, I therefore condemn it.

    The APC government should have at least consulted the masses so that we can prepare psychologically.

    APC should remember that we are in a democractic dispensation and not in a military regime.

    In conclusion, even if the removal of fuel subsidy is the best thing to the Nigerian masses, the way through which it was removed is totally wrong and unacceptable in a democractically elected government.

  5. Suleiman says:

    The presidency has to carry the Nigerian masses along even if it is going to make a brilliant policy.

  6. Ahmed says:

    Challenges and hardship bring the best out of us.

    I never knew that i was a good political analyst until when I started spending N15000 in just 3 days on fuel.

    I want to travel to Kaduna this weekend but I am still wondering on the amount I will spend on fuel.

  7. Jonah says:

    This is the road to change: very rough and narrow.

    My concern is that it is only the masses that make the sacrifice while the leaders continue to live their expensive life style. They keep telling us that they are aware of our pains while they still bring policies that add to our pains.

    The sacrifice for change should come from both angles.

  8. Abubakar says:

    When some one says he is aware of your pains and yet does nothing to mitigate same rather make policies that add more pains on you, for how long would you keep believing him?

    Please let’s opens our eyes!!!

  9. Ibrahim says:

    A bag of rice jumped from N6,500 to N15,000; a basket of tomatoes from N6,000 to N35,000; a liter of petrol from N86.5 to above N145 (sold at a Forte Oil station at N155 today as against N86.5 yesterday at the same station); electricity bills shot up by over 45%; a dollar from N189 to N321 but MINIMUM WAGE is stagnated at N18,000/month for close to a decade.

    HOW DOES AN ANTI-CORRUPTION GOVERNMENT DISCOURAGE CORRUPTION IN PUBLIC OFFICES?

    This regime is building house on quicksand!

  10. Fache says:

    Fuel subsidy and other such subsidies cannot be efficiently or effectively administered in our country. Our socio-economic realities make it nigh impossible.

    How many are we truly? How much PMS do we truly consume? Are our borders secure? Does all PMS imported or pumped from the refineries (when they work) get to Nigerians?

    How much of the subsidized product end up in the neighbouring countries?

    People should stop emotionally opposing deregulation. There is no logical basis for supporting wastage of meagre foreign exchange reserve pursuing an illusion.

  11. Hassan says:

    VP says subsidy was not removed, other party members say it was removed.

    Who is fooling who?

  12. Abdul says:

    STILL ON THE FUEL PRICE – WHAT YOU NEED TO KNOW

    I have had to read many distorted, fabricated or myopic perspectives on this issue. Unfortunately many of these views are either borne out of true ignorance or deliberate attempt at inciting the citizens against this regime. Yet, one does not need rocket science to understand the nitty-gritty of what is on ground.

    For a start, as clearly outlined by the vice president, this is not a subsidy issue at all. And I totally agree with him. In the past, the regime of GEJ hid under the cloak of subsidy to siphone, pillage and empty our treasury. Today, this has changed. Even with exchange rate of 196 naira per dollar there was rarely any need for subsidy. As such, it was not included in the budget.

    However, to import fuel, marketers would ordinarily have to get the dollars from the cental bank. This is where the problem lies. First, the unprecedented magnitude of corruption in the reckless regime of GEJ saw our dollar reserve depleted beyond imagination. Dollar was practically being thrown about like pure water in the run up to the election. As if this was not bad enough, crude oil price nose-dived from over $100 to less than $40. Beyond the resulting plunge in the country’s revenue, the availability of dollar crashed further.

    Clearly, the CBN had less than enough dollar to sell to oil marketers. Inevitably, they have to get dollars from black markets to import fuel. You and I know the implication – the landing cost of petrol will soar. Those who cannot risk it will stop importation, which explains the scarcity experienced in the last few months. Those who can will increase price to avoid loss, which is also logical.

    The onus was now on the FG to solve this conundrum and restore sanity. That means having to officially accept the reality of price increment. But then who pays for this excess? The FG or the direct consumers?

    For the FG, it was a serious headache. Such payment had no budgetary allocation. Again, after the epic lootery and thievery that characterised the last regime, the country clearly had no money to cater for this. It is so bad that close to a third of the budget is to be sourced externally! Hence, accepting to pay for this excess will mean having to stop most of the capital projects being planned while also delving into workers’ salaries. Certainly, chaos and stagnation will follow suit.

    Obviously, the government had to go for the lesser evil – allow the consumers pay, while also protecting them by putting a cap. Market forces will decide the rest.

    True, this is a difficult decision by PMB and his cabinet. We are where we are partly due to irresponsible past governments and corrupt politicians, and partly due to no fault of ours. But we have to move on. In doing so this is the sacrifice we have to pay.

    By Dec. 2018 when we can fully produce our total consumption, then we can revisit this issue. Till then, Nigeria needs your prayers.

  13. Jones says:

    The Unitarist versus the Federalist

    President Buhari is a Unitarist in orientation. All military men are unitarist in orientation. What does it mean to be a unitarist?

    A unitarist is an advocate for a unitary system of government. That is not all. All unitarists believe in a central command system of government. Because of the military nature of a unitary system of government, all unitarists tend to be dictatorial.

    A unitarist believes a central command system is more effective than a devolved federal system. A unitarist believes that if a country can be controlled from the center and that center has good leadership strength, all will be well. A unitarist believes in central confrontation, they perceive every call for negotiation as an insult and threat on their central command system. Dialogue is unnecessary. They believe force from the central government can resolve any crisis. They believe the gun is mightier than the pen. If President Buhari has his way, he will wipe out the Shiites, Niger Delta Militants, IPOBS, the Federalists and any other non-conformist threat to his central command system. This does not make him a bad person though, it’s just the nature of a unitarist with a military background. To the unitarist, all non-conformists are criminals. To a unitarist, the central command system is sacred, it should not be questioned. None of the central powers should be devolved. None. The unitarist avoids looking at the root cause of issues. Afterall, they have both the yam and the knife at the center, why should non-conformists be tolerated or dialogued with?

    A unitarist leader is very fearful of losing an inch of his central command authority. He can do everything possible to hold on to the central power, a unitarist therefore sees the call for devolution of power as an insult or even treason. Because Nigeria practices a unitary system of government, most politicians automatically become unitarist in orientation once they get connected to the central command system.

    Minister Fashola was a Federalist, so was Tinubu, El Rufai, Atiku, Emir Sanusi, etc. They have all become unitarists. They no longer talk about the need for state police, decentralization of electricity generation and distribution, resource control, decentralization of economic and political powers, restructuring of the states, the need for state constitutions, etc. Once you get connected to the central command system, you become infected! They return to become Federalists after they are disconnected from the central command system.

    One of the evils of the unitary system is that it makes the unitarists believe they can fix it all from the center. You have all the resources, all the man power, absolute power, security, etc., why can’t you certainly fix it all from the center? That is a major pitfall of a unitary system. At the end, despite the central control of everything and the genuine efforts, the unitarist ends up as a disaster to both himself and the country, they always do end up as failures. President Buhari will not be different. Goodluck Jonathan was a unitarist but not until the end of his tenure when he saw the need to devolve some federal powers. He failed anyway.

    Millions of Nigerians have over the years become unitarist in orientation. They have been infected by the ‘feeding bottle’ central command disease. The lawmakers are unitarists. The civil servants are unitarists. The trade unions; NLC, TUC, ASUU, etc., have all become unitarist in orientation. Younger Nigerians are also infected. Reclaiming Nigeria from these unitarists will be a difficult task. If you are one of those Nigerians who believe Nigeria’s problems can be solved by just good leadership at the center, you are a unitarist.

    The 1999 Constitution is a unitary military document, it is unitary in spirit but federal in words. Every leader who operates within the ambit of that document becomes a unitarist. Whether we elect a civilian or a military man to become President of Nigeria, as long as he is to work with that unitary military document, he automatically becomes a unitarist and he is bound to fail at the end.

    As long as we still operate that 1999 Constitution, Nigeria is still under unitary-military rule. It does not matter whether we elect the politicians by democratic means. The system determines their behavior.

    It is time to discard this unitary system of government and entrench a proper federal system.

    I am a Federalist.
    I believe true federalism will fix Nigeria.
    I believe in the devolution of economic and political powers.
    We need more Federalists in Nigeria.

    #BecomeAFederalist
    #PreachTrueFederalism
    #RestructureNigeria
    #TrueFederalism
    #SupportRegionalAutonomy

    #Copied

  14. Jennifer Okorie says:

    On a Serious Note!!!

    Today, I want to take time and thank GOD for making Buhari the president of this country.

    At first, I did not understand why GOD allowed it to happen. But now I know and I HAVE SEEN THE BENEFIT.

    This is how I understand the benefit.

    Had it been Buhari did not become president:

    1. We will think that by now fuel will be #45 per litre.

    2. We will think that by now #1 will be equal to $1.

    3. We will think that by now three million jobs would have been created.

    4. We will think that by now unemployed youths would have been receiving #5,000.00 stipends.

    5. We will think that by now pupils would have been getting at least a meal(including fruits) in school.

    6. We will think that by now Buhari would have made his assets and liabilities public.

    7. We will think that by now 720,000 jobs by the 36 states in the federation yearly (20,000 per state) would have been created.

    8. We will think that by now there would be permanent peace in the Niger Delta and other conflict prone areas such as Plateau, Taraba, Bauchi, Borno and Abia.

    9. We will think that by now the government would have started creating additional middle-class of at least two million new home owners in the first year in government and one million annually thereafter.

    10. We will think that by now maternal and children healthcare services would be free.

    The list is almost endless…

    Let’s continue to pray for Nigeria and PMB. We shall prevail

    #copied

  15. Okiemute says:

    Rather than confronting issues, people are seeing PMB as a god that can not make administrative mistake or commit economic blunder. He is human. He left govt a long time and many of those in his cabinet now never ran the economy of their villages. Let us wear our thinking caps. Propaganda can win elections but it will not help do the work or help govern the people. The time has come to face the realities.

    Like GEJ had planned to do, let us slash the salaries and allowance. Let us reduce approval of contracts by ministers to 50m naira and regulate the number of such contracts the minister can award in a quarter. Let us reduce the profit margin of govt contracts.

    Until we do all these, we are just on one spot cycling like the barber’s chair!

  16. De Truth says:

    And suddenly there is fuel in every station. All the problems of distribution miraculously summounted.

    We should think deeply about this and stop playing politics.

  17. Orie says:

    It was said that the independent marketers have not been able to access forex from the CBN since January this year, hence the scarcity and rise in price of PMS.

    How did they get forex that many of them started selling at 105/110 just b4 the announcement of this increment? Will NNPC also get forex from secondary sources? Otherwise why will NNPC also sell at 145? I think there is more to this than meets the eyes.

  18. Anon says:

    Osinbajo said the fuel price hike is based on Forex.

    Kachukwu said it’s subsidy removed.

    SGF said it’s total deregulation of sector.

    Buhari is quiet and blaming GEJ.

    NLC don’t know what to fight.

    Nigerians are divided.

    GEJ is travelling the world enjoying his freedom.

    OBJ is saying Buhari is economically illiterate.

    Tinubu hails Buhari’s courage.

    Lai Mohammed said he doesn’t need to explain anything to Nigerians.

    Nigerians are confused!!!

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