The Nigerian Government announced on Friday that it has scrapped the Petroleum Support Fund, also known as fuel subsidy. It stated that the Government would January 1, 2016 scrap the controversial subsidy on PMS [Premium Motor Spirit, petrol in common parlance] and reduce the pump price of the petrol to N85 per litre.
Minister of State for Petroleum , Dr Ibe Kachikwu who disclosed this during a tour of the Port Harcourt refinery on Christmas Day expressed hope that the new price regime may come on stream January next year.
He said efforts were on to get the refinery to achieve 60 percent production capacity and to supply about 11 million liters of petrol daily.
“If you look at the new PPPRA template that we developed and which I just signed off two days ago, when it is announced you will find out that for now ,and I use the emphatic word of the President for now, the price of the refined product will actually be lower than 87 naira, It will be 85. We will probably announce that in January if the prices hold.
“like I said, we have done a modulation calculation and it is showing us below N87. I imagine that if PPPRA publishes it today, it will become effective immediately. But the 1st of January that is when we are looking at.”
“What that does for you is that its modulating. If it goes up you move up, if it comes down you come down. So we take away the fact of having to go find funds to pay for these subsidies that we cannot afford.
“More importantly we try to be as close to the pump price that we have now as possible,” he said.
Kachikwu who is also the Group Managing Director, Nigerian National Petroleum Corporation, NNPC said government had resolved to scrap oil subsidy because of alleged fraud around it.
“So for the first time people will understand that the pricing modulation I was talking about is not a gimmick. It is for real. The objective is that we cannot afford to continue to subsidize .We can’t even understand where those subsidies were going to. There is a lot of fraud elements in it so we need to cut that of.
The second is the earning capacity of the Federal Government is deteriorating by the day with lower prices of crude “, he said.
He also said there was improvement in security of pipelines with the engagement of private contractors by the federal government. The product officially sells for N87 per litre, although it sells for higher prices in some states of the federation.