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Subsidy removal: Atiku, others are playing politics—Sylva

Former Bayelsa State governor and Minister of State for Petroleum, Timipre Sylva has said the recent full deregulation of the downstream sector of the oil and gas industry was for the benefit of the average Nigerian. In this interview with select journalists in Abuja, Sylva insists that leaving the product to the vagaries of market forces is the biggest incentive to encourage investors to the industry. TAIWO AMODU brings the excerpts:

Fuel subsidy has gained notoriety in the country. What will this administration be doing differently? Nigerians have also expressed anger over the timing.

I believe that this discussion around subsidy has been a vexed issue that has captured the imagination of this country for a long time now. Successive administrations have attempted to deregulate. But sometimes, some administration lacked the political will and at other times, the time was not good for it. And why did I say the time was not good for it? Does that imply the time is good for it now? The problem around deregulation is that people must understand, first and foremost, that the product we are talking about is a derivative of crude oil. It is refined from crude oil. Therefore, it has a direct relationship with the price of crude oil. If the price of crude oil goes up, then you expect that it would reflect in the price of the derivative. So, the best time to achieve this we looked at was the time when crude oil prices are low so that Nigerians will get the benefit of those low prices.

In March, when we announced the deregulation, the prices were low and that advantage was transferred to the consumer. So, we brought down the price of petrol. The unfortunate thing is that when we brought down the price of petrol, nobody reacted in the market place. The prices were the same. Nobody reduced their prices because the price of petrol had reduced. Even bus fares, taxi fares were the same. It did not go down when we reduced the pump price of petrol. We thought that those people in the market, the transport drivers and transport owners would reduce their prices. But nobody reduced their prices. But anytime there is even a kobo increase in the pump price of the product, you see that people will increase their prices triple fold and fourfold.

At this moment, let Nigerians not be fooled, there are people who are ready to take advantage of every situation to create anarchy and chaos. And it is these people that are at work now. Is anybody saying that this policy direction is a wrong policy direction? That is the discussion we should be having. If it is a wrong policy direction why has every successive government attempted to do the same thing? It is something that is unsustainable. The subsidy is unsustainable. Subsidy means that you buy the product at a certain price and then you reduce the price and sell it at a loss to the people. It is something that is good to do. It is something that our president would like to do so much because of his love for the common man. But is it something that can be sustained in perpetuity? You get the product and sell it less at the pump. And that is not the only subsidy. You also subsidize the effects that are used to import the product.

So in the end, the subsidy is going in two ways. It is like burning your candle from both ends. How long can that candle last? So in the wisdom of the president and all of us, we felt that it was time because this subsidy is something that cannot be sustained in perpetuity. It is time for Nigerians to face reality and do the right thing. What is deregulation going to do? It is going to free up a lot more money. At least from the very beginning, it will save us up to a trillion naira and more every year. Already, we have taken up the budgetary provision for the subsidy which is about N500 billion in the budget. Also, we have taken off the excess foreign exchange price, the special rate that was given to NNPC which also came at a cost. So, all the money that we used to defend the naira at that time to subsidize the dollar will now be freed up for development. And, I believe that going forward, we will begin to see a lot more development, a lot more money available to the government that will be put into critical infrastructures instead of being burnt in our cars.

Let us look at subsidy critically. Who are the beneficiaries of subsidy? When a few years ago you have this subsidy scam all over the place, all the money that was taken by all the subsidy thieves and so on, how many poor people were among those people? Subsidy only provides an opportunity for rich and unscrupulous Nigerians to steal and enrich themselves at our expense, at your expense. So, deregulation is actually a policy direction that is good for the common Nigerian. It is going to produce a lot of opportunities. Before now, you would ask: Why has the refining sector not developed? It is because no refinery can operate commercially in Nigeria with a subsidy.

If you have a refinery and you refine your product and you are expected to sell it at a subsidized rate, how is the refinery going to make a profit and survive? So, nobody wanted to invest in our refineries. And that is one of the reasons why our refineries became unsustainable as well because they were refining and selling at a loss. So, every time they come back to the government to ask for money. Anytime any part got bad they had to come back because they were not operating commercially. So, they don’t have money to replace those parts. That was why we were refining and selling at a loss. With deregulation, it means that refineries can operate commercially. And then you can see a lot more investments in that sector and it is going to create a lot of opportunities and jobs for our people. With deregulation, it also means that marketers can import product by themselves and sell at market rates to Nigerians. It is going to create a lot more activities and opportunities. So, deregulation is going to really open up. You know what happened in the banking sector with deregulation. We had a few banks but today I cannot count the banks because that sector was deregulated. You see what deregulation did for the airline sector; we had only Nigeria Airways in those days. When the sector was deregulated, you see that the sector has become a major employer of Nigerians.

It is people who are political about it. They want to politicize everything they are saying all kinds of things about the policy direction that has been taken especially at this time. At this time, the funds available to the government have also diminished. You heard yesterday that we lost 60 percent of our earning due to COVID-19 and its attendant difficulties. So, are things expected to go the same way? They say the definition of madness is to continue to do the same thing and expect a different result. Are we going to continue as a country to do the same thing and expect a different result and all of us are just blaming ourselves?

Let us reason together. This is something that is necessary to be done now, because even if you say that we want to bring back a subsidy, where is the money? How much are we earning? When 60 percent of your money has already been eroded by demand? I mean, how much is the crude oil price of today? Some of you will know. It has even dropped from about 40  dollars to about 30 dollars today (Thursday). After all the efforts we have put in today to shore up the prices, look at where we still are. Our production dropped. Our Organisation of Petroleum Exporting Countries quota is 1.412 million barrels. You can imagine and that sold at how much?  It is sold at $35 to $40. How much is coming to this country today and how much do you want us to continue to subsidize petroleum products? This is a very critical time in the history of this country and in the history of the world. Everybody’s patriotism will be called to question. And, I believe that you as Nigerians should come together with the government, rally your friends, rally Nigerians to support the government to achieve this because in the long run, it is better for all of us to achieve it because of the benefits it will create; the jobs and opportunities that it would create.

Alhaji Atiku Abubakar kicked against the increase in price. Would you say Atiku was just playing to the gallery?

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Of course, it is very clear to everyone, including yourself that he is playing to the gallery. What other solution does he have? This is somebody that already told Nigerians that if he was president he would have sold NNPC. Didn’t he say so before? That is, he would have commercialised NNPC. Would he have been operating subsidy in an NNPC that has been commercialised? So, we should be very careful with some of these leaders who speak from both sides of the mouth because today they are on the wrong side of the divide. He said and he swore that he was going to sell NNPC. That means NNPC was going to be privatised. So, would a privatised NNPC still be subsidising? That meant that he never ever thought one day of keeping subsidy if he were president.

Today, what other policy direction does he have? Has he suggested something else? He did not suggest anything else. He is just playing to the gallery. You cannot believe people like that. What I am saying here today, is it wrong? Are you not seeing that we are being truthful about what we are trying to do? This is in the interest of Nigerians. Let us not follow these politicians who want to politicise everything. At this time of our national life, we should jettison politics and try to salvage the national economy first which is at risk now in our best interest.

What would be the fate of the Petroleum Equalisation Fund (PEF) in a deregulated oil sector regime? And how soon will the nation’s four refineries be resuscitated?

PEF will no longer exist after the Petroleum Industry Bill (PIB) even the Petroleum Products Pricing Regulatory agency (PPPRA) will no longer exist. They will be subsumed under a new authority. But, I do not want to go into discussing the PIB now. They will reincarnate in a different form but not exactly in this form but of course, I do not want to preempt the passage of the PIB. It is for the National Assembly now. So, there is going to be a role for them. They are not going to be obliterated. But they will be subsumed.

Talking about refineries, what we have done is to sequence the rehabilitation of the refineries. We are going to start first with Port Harcourt refinery. In Port Harcourt, we have two refineries: the old refinery and the new refinery. The old refinery of 60,000 barrels and the new refinery, which has a total capacity of 250,000 barrels. Now, there is going to be the third refinery within Port Harcourt refinery. It is going to be a private refinery. That project will be signed in the fourth quarter of 2020. And by the first quarter of 2021, work will start in earnest. Discussions are ongoing with the rehabilitation of Warri and Kaduna as well. And I want to assure you that with deregulation, it would not be difficult for us to fix these refineries because this will be commercially viable ventures now and properly managed. Government is not going to continuously manage them. We want to put the Operate and Manage contract so that the professional managers of refineries will take over the management of these refineries. Before now, because of subsidy, no professional will take over the management of a refinery when he is going to be producing at a loss. But now, every professional manager of the refinery is interested in managing these refineries.

What do you make of the timing for the removal of subsidy in the face of the Covid-19 challenges?

This government is a pro-people government and it is in the interest of Nigerians for us to do this. Nobody saw COVID-19 coming. Did you? So, we react to the situation. This is happening today because the government is being proactive and realistic on the basis of COVID-19 which was not anticipated. To give it a human face, we are introducing an alternative fuel. We are giving autogas. Gas will now become fuel for our cars. This programme will be rolled out within the next month. So, if you go to a filling station and you convert your car to dual capability or dual fuel, then you drive into a typical filling station you will find Liquefied Petroleum Gas, you find Compressed Natural Gas and Liquefied  Natural Gas being sold. So, if you look at the price of Premium Motor Spirit versus the price of gas and you think that gas is it is going to be cheaper. Gas will even be cheaper than PMS as it is today.

So, you see that we are also giving an alternative to the ordinary Nigerians. You now have a situation where tricycles, I pass my neighbour generators etc will convert to gas. So, you connect your gas cylinder in your house to your generator and it becomes easier for you, cheaper and cleaner. We are not just deregulating, we are also giving you an alternative to making it easier for the average Nigerian. What I want you to begin to really understand more is how you are going to transit from fuel to gas, and you will see that you will not miss much. The average transporter will probably even be better off with gas. So we are introducing it as an alternative at least to cushion the effect so that when you go to a filling station you have options. And that programme will be rolled out within the next month. And it is going to create a lot of opportunities and jobs. So, you see that deregulation has not taken away the human face of this government. This government is still a government of the people and by the people.

Have you considered the conversion of the fuel vehicle into gas? Won’t it cost a lot of money?

No. We have taken it into consideration. It is not going to cost that much. There are companies that are coming and have started doing it. You will be shocked by how easy it is.

What are the palliatives to cushion the effects of subsidy removal on the citizenry?

I believe that the measure we have taken is going to be in the best interest of this country. We have been attempting to do it over the years but you know that it is just a matter of time before this thing is done. If this administration does not do it, another administration will do it. I remember I saw the former governor of the Central Bank, Sanusi Lamido, he said at that time when they were talking about deregulation, crude oil prices were over a $100. So, from what he told us, they were earning about $16 billion from crude oil. Today, we earn less than half of that. And yet, he said at that time, they were spending all of that earned in the importation of petroleum products.

Today, this government is earning much less than that. When we say our earnings have reduced to 60 per cent, we are not talking in relation to $100 per barrel. What we achieved last year was that the oil price was about 60 dollars per barrel. This year, we have lost more than 60 per cent of that value that we have last year. We are not even talking in terms of the $100 oil which was the reality at the time of previous administration. Let all Nigerians see what we are doing and it should be in the public domain and interrogate what the price of PMS constitutes. So, we are bringing it to you and democratising the process of pricing PMS instead of government sitting back and some people coming up and fixing the prices while some unscrupulous business people take advantage of the situation. We cannot continue with that as a nation and that is why we have come to tell Nigerians.


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