Sustenance of the petrol subsidy regime is one of the reasons that rendered the refineries unviable, Minister of State Petroleum Timipre Sylva confirmed on Sunday the 27th of June, 2021.
The Minister emphasised the need to deregulate the downstream oil sector in order for the economy to grow.
The Minister revealed this on the New Agency of Nigeria (NAN) Forum in Abuja.
Sylva stated that: “Part of the reasons why the refineries were not working is subsidy because a refinery that is producing something at a certain cost and selling at a loss, how can it sustain itself.
“Over the years, the refineries couldn’t sustain themselves and all of them died. So, if you do not deregulate, you will find out that even the refineries, if you fix them today, they cannot be commercially operated because the refineries need maintenance and they need to run.
“If you are producing something and they are selling at a certain subsidised price, it cannot work that is why you see that the sector is not growing at all,’’ he noted.
Nigeria has four refineries – two in Port Harcourt, one each in Warri and Kaduna – all of which are virtually dead.
Recently, the Federal Executive Council (FEC) approved the rehabilitation of the refinery in Port Harcourt.
A mega refinery is being constructed by a businessman – Alh. Aliko Dangote in Lagos which is expected to commence operation in 2022.
The Minister said the Dangote Group’s refinery is located near the sea to facilitate exports and enable profitability for sustainability.
“If he sells within Nigeria in this subsidized environment, he will not breakeven. So, that is the way it is and we must look at it because, I know that a lot of Nigerians think that we must carry on like this but in the end, I think it is better for us to deregulate,” he said.
He described as unfortunate people’s perception about subsidy, making the common man on the street to begin to fight government “but the subsidy never favours them”.
“It is actually in the interest of the common Nigerian to ensure that some people do not just profiteer on them, which is what has been happening.
“You must have heard of all the subsidy scams few years ago, people were making billions on these same subsidies.
“And when you say you want to take it out, the common man is the one on the street but at the end of the day is it the common man that is benefiting? I don’t think they are the biggest beneficiaries,’’ he said.
According to Sylva, all the fuels that are connected to the common man have been deregulated.
“Kerosene, which the common man uses to cook in a stove and used in the village to burn the fire wood is deregulated. The diesel that is used to move the trucks that move food from farm to market is deregulated; but petrol which is the preferred fuel for big people is the fuel that have defied deregulation.
“But at the end of the day, I believe that it is better for us because if we are able to deregulate, then we can save money.
“First, you can imagine the savings we will make as far as Foreign Exchange (FOREX) is concerned and of cause, it will bring down the pressure on FOREX.
“People will be able to access FOREX for imports, government will not be the one providing foreign exchange for the importation,” he said.
According to him, since the government will no longer be subsidising, all that money that will be gained, which is over a trillion naira yearly, instead of being burnt in cars, will now be used for development.
“You can imagine how much money the federal and state governments will have at their disposal if there is deregulation,’’ the minister said.
Sylva added: “I will say that my stand on fuel subsidy and deregulation is well known. I strongly believe that for this country to move forward, for our economy to make the progress it desires, we need to have a market-driven pricing of products.
“A situation where you produce something at a certain cost and you have to sell it at a lower cost to people because you are taking some of that burden off the people is not the best.
“It is a very desirable thing but it is also not too sustainable because what happens is that you produce it for N10, you sell it for N5; tomorrow, you produce it again at N10, you add N5 from somewhere, produce it again at N10 and sell it for another N5.
“So, the losses increase and compound on a daily basis and those accumulated losses have brought us to where we are,’’ he said.