Ibe Kachikwu
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Says at current crude prices, there is no subsidy
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Ogbe: Funds should be diverted to agriculture
Chineme Okafor, John Shiklam in Kaduna and Adebiyi Adedapo in Abuja
Contrary to the perception created on Christmas day that the price of
petrol would be reduced to N85 per litre effective January 1, the
Minister of State for Petroleum, Mr. Ibe Kachikwu, sunday clarified that
its official price would be announced next month.
He added that at the current price of crude oil, the subsidy element
had been eliminated, but the price of petrol had not been deregulated
nor would it be deregulated come January.
“It will be adjusted within the modulating band of N87 per litre to N97
per litre in accordance with the international price of crude oil,” he
explained.
The minister, who made the clarification during an inspection tour of
the Kaduna Refinery and Petrochemical Company (KRPC), said the new price
was imperative in view of the current market price of crude oil.
According to him, the price of petrol could go either way, “it may be
increased above the current selling price or may be reduced below the
current selling price all things being equal”.
He said his visit to the Kaduna plant was to enable him have an
on-the-spot assessment of its refining capacity, stressing that the
federal government was working round the clock to ensure availability
and sustenance of petrol in a few weeks from now in order to end the
fuel queues.
Speaking on speculations that the federal government intends to sell
the refineries, the minister stated that there was no such plan to the
best of his knowledge, pointing out that the government was working
round the clock to ensure that the refineries operate at optimum
capacity to satisfy the needs of Nigerians.
On the retention of subsidy on fuel, he did not conceal his displeasure
over what he described as “political subsidy”, saying that the amount
spent in the past was huge, but pointed out that government intends to
introduce a price modulation band with a view to having a stable market.
According to the minister, “If there is an increase or decrease in the
price of crude oil, we will make the necessary adjustment, so in January
2016, we will announce the new price of petrol in accordance with
trends in the market.”
He said the Kaduna refinery was doing well, adding that more work
needed to be carried out on the plant to make it operate optimally.
He said the refinery was currently producing about 1.5 million litres
of petrol per day, but efforts were being made to produce about 2
million litres of petrol per day.
He said the current hardship being faced by Nigerians would soon be a
thing of the past, adding that the queues, which are gradually
disappearing, would completely cease to exist in a matter of weeks.
He stressed that the federal government was currently not paying
subsidy on petrol due to the low price of crude oil in the international
market.
Kachikwu also said that the situation would likely remain unchanged
insofar as oil prices remain low, stressing nonetheless that he was more
interested in ensuring that petrol is available and affordable than
dwelling on subsidy removal.
He noted that the government was currently modulating the pump price of
petrol to ensure that supply of the product remained in line with
trends in the market.
Kachikwu also explained that by the end of January 2016, he expects
that Nigeria would be able to source up to 10 million litres of her
domestic petrol consumption from its four refineries in Warri, Port
Harcourt and Kaduna.
His clarification on the subsidy issue also became necessary following
requests made by the Nigeria Labour Congress (NLC) and Conference of
Nigerian Political Parties (CNPP) that he provides an explanation on
reports that the government was going to deregulate the downstream
petroleum sector and remove the subsidy on fuel.
On this, he said through the price modulation mechanism, the government
would continue to monitor prices to keep it within a specified band.
“First let me say that we are expending too much energy on semantics.
There are two critical issues here, one is should the federal government
continue to fund the gap that we see – this a huge N1 trillion, and I
think everybody is on the same page that we need to get out of it.
“Where we have a disagreement is if we get out of it, should we sell
products at a certain price or should you let the free market to roll in
so that you can skyrocket prices.
“Today, there is no subsidy, we are selling products at N87. In
January, we will look at what the trend is and we will announce prices,
if that is less than N87, we will announce it and if it is more than
that, we will have to announce it.”
Kachikwu explained that his focus right now was to make sure that the
refineries are working, saying: “The more they work, the higher the
chances that we will be closer to the sort of pricing we are comfortable
with than when they are not working. That is why you see me putting a
lot of energies in going around the refineries.”
Kachikwu explained that President Muhammadu Buhari was backing the
price modulation mechanism to keep it within the reach of Nigerians,
adding that he was more interested in balancing market trends with such
desire.
“The president is very emphatic on this, he says for now, he expects
that products should be at N87. He has also given approval for us to be
able to look at market trends and make adjustments as need be, so when
you keep asking me if subsidy has been removed, I ask what is subsidy?
“At today’s price, there is no subsidy and that is why I have gone away
from the use of the word subsidy and have continuously said that I am
more on the page of price modulation. How do we look to fluctuate the
market to reflect market dynamics?” he asked.
Continuing, he said: “I don’t want to get caught into this subsidy or
no subsidy issue, or on money provided in the budget or not. I think
what is critical is two fold: one is that the amount that we spent in
the past on providing what you might call monetary subsidy is huge, we
have never been able to account for it and the amount of corruption
there, nobody has been held to account.
“The reliability of that and the affordability of that is an issue we
need to get away from whether or not you believe in subsidy.”
Kachikwu said that in line with the desires of the president, he was
pushing to establish a regime of efficient and affordable fuel supply in
the country.
“Would you therefore free the price so that people can sell at whatever
prices? Not likely, we would like to see some level of modulation where
prices can relate to what the market dynamics are and that is what we
are doing.
“My commitment and I think that is what the president’s commitment is,
is one, provide products all the time so that there is efficiency, and
provide it at the least possible price that you can and let it have some
relationship with what the trends are,” he noted.
The minister also stated that “when the price of crude oil begins to go
up – and we have an interest in both because we want the price of crude
to obviously rise – and begins to affect the selling price of local
products, we will look at those trends and then begin to see how we can
adjust our pricing”.
“But we are not going to be adjusting prices on a day-to-day basis, we
are going to take like an average price and I think that today when you
look at prices, we have no subsidy but prices remain low and that is
what we need to do,” he added.
Speaking on the volume of products he expects the refineries to add to
the domestic requirements, Kachikwu explained that though the country
would still import products next year, production could rise to 10
million litres of petrol a day from the refineries starting from the end
of January when repair works would have been completed on them.
“Ideally, we want to be able to get to about 10 million-type capacity
out of some 40 million that we say is the national consumption per day.
“All things being were equal, I think the maximum capacity for Kaduna
will be in the 2 million to 3 million range, Port Harcourt will probably
be in the 5 million to 6 million range, and Warri if it comes on stream
will be another 3 million or 4 million.
“Warri is projected to come back between early and mid-January. So I
will say that by the end of January, if all things are working and we do
not have any other complications arising from these aging plants, we
will expect to see 10 million litres,” he said.
But as the government gets set to adjust the price of petrol in line
with the going rate of crude oil, the Minister of Agriculture and Rural
Development, Chief Audu Ogbeh, has said that the country will benefit
more, if the funds earmarked for fuel subsidy are channelled into the
agricultural sector.
According to Ogbeh, if the funds running into billions of naira spent
on subsidising petrol are deployed to agriculture, this will guarantee
long-term revenue for the nation.
Ogbeh, in a statement signed by the Director of Information in the
ministry, Mr. Tony Oheari, also pledged support for all agriculture
institutes in the country working on robust research to improve crop
yields.
The minster also said part of the subsidy funds should be used to
enhance the capacity of agriculture colleges and institutions and for
extension services.
He explained that the essence of Colleges of Agriculture is to produce a
new generation of young farmers to take over from the old ones, adding
that all malfunctioning agricultural research Institutes would be fixed.
“The minister promised to establish extension offices to be manned by
extension officers in all the local governments in Nigeria in the next
four to six years, with students of Colleges of Agriculture involved in
the new extension system,” he said.
