MAJOR Oil Marketers’ Association of Nigeria (MOMAN) has emphasised the need for the Federal Government to scrap its fuel subsidy regime and focus on privatisation of the country’s four refineries.
Executive secretary of the association, Femi Olawore, in an interview with The Guardian at the weekend, urged the government to divert its payment on subsidy in developing the country’s agricultural sector, as well as human capital development.
His words: “Fuel subsidy is an aberration. It is not a normal thing. It is either the country is self-sufficient in fuel production or should continue importation of the product. In the short run, importation should continue and it should be liberalised and there should not be fuel subsidy.
“Government should remove subsidy because at the end of the day, nobody gains from the subsidy, not even the marketers. Many people erroneously believe that the marketers are actually benefiting from subsidy. The genuine marketer has already paid up-front for the product. He is only being reimbursed for the expenses he has incurred on behalf of the government. Nigeria should brace up to face reality and remove subsidy”.
He added: “Instead of subsidising fuel, government should subsidise agriculture and manpower. The Asian Tigers lay emphasis on human capital. Government should give students scholarships to study abroad, just as it is being done by the Indonesians, Malaysians and Indians.
“The country’s refineries are not producing up to 20 per cent of the nation’s demand. This is, however, insufficient for the ever-increasing consumption of Nigerians, thereby leaving the country with the option of importing products in order to boost consumption.
“We want government to deregulate the downstream sector. When we talk about deregulation, we are not saying that there should not be a regulatory framework. There is deregulation in the telecommunications sector, but there is regulatory framework. The time is ripe for us to deregulate the downstream sector”.
He disclosed that the Federal Ministry of Finance has started payment of fuel subsidy to marketers, adding that the marketers were very happy with the procedures.
“Every marketer has been paid something. Every marketer has been paid above 50 per cent. I am sure the payment is a continuous process”, he said.
Olawore hinted that the on-going investigation into fuel subsidy scam has helped trim the number of fuel marketers in the country, most especially, portfolio marketers.
He stated: “The number of importers has been trimmed. Now we have very serious marketers. No portfolio marketers. We now have marketers with tank farms and retail outlets. We now have marketers that can be trailed if the need arises. The Petroleum Products Pricing and Regulation Agency (PPPRA) has brought sanity into the whole importation process. Any serious marketers who brings in products from abroad should ensure that they get to the consumers. If they bring in products from abroad and keep them in their tank farms, they have not completed the work. The arrangement is that when the marketers bring in products, they must make sure they get to the consumers at the government approved price.”
He said non-functional and low capacity utilisation of refineries has resulted to inadequate supply from local refineries. The existing four local refineries with capital 445,000 bpd capacity only contributed about four per cent to 20 per cent in the past five years to the national premium motor spirit consumption.
The increasing yearly subsidy burden remains unsustainable, he said, adding that over N2 trillion was expended on products subsidy in 2011 alone, which the agency said, was more than the 55 per cent more than the 2011 Capital Budget Expenditure.
Speaking in the same vein, Executive Secretary of PPPRA, Reginald Stanley, said non-functional and low capacity utilisation of refineries has resulted to inadequate supply from local refineries.
Stanley added: “In addition, huge price disparity from neighbouring countries where prices are higher has encouraged smuggling of petroleum products across borders. Smuggled fuel from Nigeria is referred to as “federal fuel” in those countries.
“According to CBN, up to 29 per cent of its foreign exchange sales were used in January 2009 to finance the petroleum products imports. Similarly, over-dependence on road haulage for transportation of petroleum products also encourages wasteful fuel consumption and destroys the nation’s road infrastructure”.
He noted that fuel subsidy has resulted to inappropriate products pricing and price distortions, adding that long years of inappropriate products pricing have led to incessant pipeline vandalism, product smuggling, black marketeering and acute fuel shortage resulting in long queues at filling stations and inability of the operators to recover costs.
Stanley said that fuel subsidy encourages waste of limited government revenue available for social services such as infrastructure, education and health services.
“The mechanism for administering the fuel subsidy does not guarantee it reaching the lower income section of the economy for which it is intended.”
To tackle the issue, Stanley said the agency has embarked on some reform initiatives. “The agency, having observed anomalies and challenges in the administration of the subsidy scheme, commenced phases of reforms to bring sanity into the scheme. These include restricted participation to only owners of coastal discharge/depot facilities (reduced from 128 to 42 initially and to 38 presently). We have commenced the automation of operations by launching the ICT Master Plan Consultancy Project and the Minimum ICT Infrastructure Upgrade stop-gap project,” he said.