End fuel subsidy now – Transition committee tells Buhari

President Muhammadu Buhari has been advised by the Transition Committee to end the fuel subsidy programme and privatise Nigeria’s four refineries.

The information is said to be contained in the report of the Transition Committee set up by the president preparatory to the inauguration of the government.

Reports, quoting sources within the All Progressives Congress (APC), yesterday, said the government faces an uphill task with the fuel being heavily subsidized and relying solely on imports for the bulk of domestic demand due to an underperforming refining system.

Indeed, the subsidy, which was revealed to have paid out more than $6 billion in fraudulent claims in 2012, is proving to be increasingly costly.

Buhari is said to be considering the recommendations made in the strategy report produced by a 19-member committee formed from APC.

According to the report, “The removal of the fuel subsidy is one of the recommendations of the transition committee,” said a senior APC source, who did not want to be named.

“The committee also suggested to Mr President that the four refineries be privatised so that the government should stops wasting money on annual turnaround maintenance,”.

A second APC source was also quoted by agency report that these recommendations were contained in the report given to Buhari earlier this month.

Removal of subsidy from oil has been a major issue in Nigeria with former President Goodluck Jonathan cutting subsidies by 90 percent in the 2015 budget because government revenues have been hit by the slump in oil prices. This has resulted in the fitful supply of the product currently being witnessed in the country.

Only three years ago when former President Jonathan attempted to cut fuel subsidies, Nigeria erupted in protests and strikes as the move resulted in doubling the price of a litre of petrol overnight.

The Nigerian National Petroleum Corporation (NNPC) said last week Nigeria’s four oil refineries would resume production in July.

The refineries are said to be running below capacity, sometimes at just 20 percent, due to neglect and pipeline sabotage.

In a press interview after winning the presidential election, President Buhari was asked if he had considered maintaining or withdrawing fuel subsidy and he replied thus: “One of the problems I have, other than the military, is the petroleum industry where I served for three and a half years under General Obasanjo. When people start talking about this subsidy I honestly get confused. I will tell you this, and I hope it will answer what you want to know. Back then we had a refinery in Port Harcourt, which was refining 30,000 barrels a day of Nigerian crude.

“Later, it was upgraded to refine 100,000 barrels a day. Another refinery was built in Port Harcourt to refine 150,000 barrels per day of Nigerian crude. So, Port Harcourt alone had the capacity to refine 250,000 barrels per day of Nigerian crude.

“But when I found myself as the Minister of Petroleum I set up another refinery in Warri for 100, 000 barrels per day of Nigerian crude and the Kaduna refinery a 100, 000 barrels per day. So Nigeria built capacity to refine 450,000 a day.

“Four hundred thousands of which is purely Nigerian crude, but 50,000 was imported. The type of crude could be Venezuelan, which could be a bit heavier. But the lighter ones – kerosene, aviation fuel, diesel, PMS of different grades could be produced from our crude because Nigerian crude is about the best in the world.

“If you could recall, after finishing as Minister of Petroleum, I subsequently became Head of State. You remember, I appointed Professor Tam David West as the Minister of Petroleum. When we rounded up bunkers, collected their illegal jetties and allowed jetties for only big firms which were doing production and development in the country, we were shocked that we had too much fuel.

“We had to begin to export 100,000 barrels per day. Don’t forget that we didn’t stop at building refineries; we built more than 20 depots during my time, from Port Harcourt to Ilorin, Makurdi, Suleija, Maiduguri and Kano. More than 3,000 pipelines were laid to connect them. A number of stations were also built to take the trailers off the road, save lives and the infrastructure on the road. It is more economical because each trailer uses fuel.

“We did all that in this country and we didn’t borrow any money as far as I know. It’s Nigerian money, from each Nigerian crude, whether Akwa Ibom, Bonny Light or whatever it is, you can work out how much products it will give you; how much petrol it will give you; how much diesel it will give you if you want to produce diesel. We could tell how much Nigerian crude cost, the cost of transportation from there to the refinery, the cost of refining, the cost of transportation to the pump stations and maybe 5 per cent go for overhead. I can understand if Nigerians pay for those costs. But somebody is saying he is subsidizing Nigerians. Who is subsidizing who?”

So, when he was asked if he would not going to agree to its continuation in anyway, he said; “I would like to be on ground and find out what really has been going wrong. Why is it that people are doing round-tripping with the Nigerian products and take money from the treasury? Some people are still in court. You know about it. So, I’m not taking anything for granted. But I will try and find out what went wrong.” [Mynewswatchtimesng]