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Why We Can’t Remove Fuel Subsidy Now – FG

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Minister of Finance, Mrs Zainab Shamsuna Ahmed

Without sounding combative, the federal government has told the International Monetary Fund (IMF) that it was not feasible now for it to remove subsidy on petrol also known as Premium Motor Spirit (PMS) as canvassed by the Bretton Woods financial institution.

The government said that until remedial measures were put in place to cushion the effects of the removal of fuel subsidy on Nigerians, it would not jump into adopting the policy.

Through the minister of Finance, Mrs. Zainab Ahmed, who spoke yesterday at the briefing by the Nigerian delegation on the outcome of their meetings with investors and institutions at the IMF/World Bank meetings in Washington DC, the government said that the IMF’s advice to remove fuel subsidy was in order, but declared that it would do more harm to the people if implemented now.

Among such side effects cited by the government in its opposition to the IMF proposal, was spontaneous panic buying of the products in the country.

The government also admonished Nigerians to refrain from panic buying because there is adequate fuel in the country.

The current official pump price of petrol Is N145 per litre, which the Muhammadu Buhari government has sustained since it hiked it from N86 per litre at the inception of the administration in 2015.

Mrs. Ahmed said:  “There is no imminent plan to remove subsidy. IMF said that fuel subsidy is better removed so that we can use the resources for other important sectors. In principle, it’s a good suggestion, but in Nigeria, we don’t have any plans to remove fuel subsidy at this time because we have not yet designed buffers that will enable us to remove the subsidy and provide cushions for our people.

“So, there is no plan to remove fuel subsidy. We will be working with various groups to find an alternative if we have to remove it. We are not yet at the point of removing fuel subsidy yet,” she declared.

The minister described Nigeria’s outing in Washington DC as a huge success, stressing that it provided country the opportunity to review developments in the global economy and proffer potential solutions.

She said that the general advice for Nigeria is to prioritise cost-effective policies that would increase resilience to shocks, boost productivity and raise incomes of the bottom 40 per cent of the population.

According to her, “in my capacity as a representative of 23 African countries, I addressed the IMFC and issued a statement calling for normalisation of trade relations among the contending parties and called for concerted efforts to supporting multilaterism and avoid protectionist sentiments.

“At the G-24 meeting, I drew the attention of the World Bank to some of the challenges we face in implementing our portfolio such as the implementation of the new environmental and social safeguards framework which tends to slow down the implementation of our infrastructure projects.

“My engagement at the IMFC also focused on the global policy agenda. Governors underscored the importance of strengthening market competition, encouraging innovation, tackling weak governance and corruption and meeting the SDGs.

“Governors underlined the importance of strengthening international coordination and cooperation to tackle shared challenges, given the potentially-damaging effects of trade tensions on global economic developments, and impact of natural disasters on developing countries,” she said.

Also, the minister of Budget and National Planning, Senator Udoma Udo Udoma, said that he had discussions with investors and development partners on potential investment opportunities in the country.

According to him, he had discussions on improving the business climate and sensitised potential investors on incentives and opportunities for investments in Nigeria.

“In the course of my meeting with officials of the International Finance Corporation (IFC), I asked for their support for our efforts to leverage the private sector capital to fund critical infrastructure in Nigeria,” he said.

Similarly, the governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, spoke on his meeting with Queen Maxima of The Netherlands who is the United Nations (UN) secretary-general special advocate on financial inclusion.

Emefiele said: “We reviewed the position of Nigeria in terms of financial inclusion, observing that the rate of inclusion is moving up aggressively and we are very optimistic that in 2020 we will meet the 80 per cent inclusion target.

“We also met with foreign investors who expressed confidence in what we are doing in Nigeria and this has been supported by the inflows that you may have observed recently between December and this time.

“A major take away from this meeting is that although the Gross Domestic Product (GDP) numbers for Nigeria is low at 1.9 per cent in 2018, I’m encouraged by the IMF predictions that global growth will pick up by second half of 2019 and emerging market economies like India, Brazil, China and Nigeria will help to drive growth.

“This means that a lot of eyes are on Nigeria and we must work hard to aggressively push up our growth numbers. But I’m hopeful that this can be achieved,” he said.

…Confirms Availability Of Petrol, Warns Against Panic Buying

As most filling stations failed to open at the weekend, the Federal Government through the Petroleum Products Pricing Regulatory Agency (PPPRA), has assured Nigerian of sufficient supply of petrol.

Executive Secretary of PPPRA, Abdulkadir Saidu, who issued a statement which collaborated with similar position by the Nigerian National Petroleum Corporation (NNPC), the current sole importer of the products, noted that the agency had observed the sudden re-appearance of queues at some filling stations over speculations of a shortfall in the supply of petrol.

He said that available data at the agency’s disposal showed that there was adequate supply of petrol with over 21 days sufficiency.

The PPPRA boss, therefore, urged fuel consumers across the country to desist from panic buying and pledged that the agency would continue to monitor the supply situation and take steps to ensure that there was no disruption in the supply chain.

Saidu said that PMS average daily supply had risen to 56 million litres in 2019 from 46 million litres in 2017, stressing that the increase was an indication of improved supply.

Part of the statement he issued in Abuja yesterday, reads: “PPPRA in line with its mandate to regulate petroleum products supply and distribution as well as establish an industry data bank has continued to monitor products supply in the sector in line with best practices. Thus, PMS average daily supply for the year 2017, 2018 and 2019 are about 46 million, 54 million and 56 million litres respectively. These indicate an improved level of supply in 2019.

“Based on the available data, there is adequate supply of PMS with over 21 days’ sufficiency.  The agency wishes to assure Nigerians to disregard the panic buying as there is adequate product supply in the system to meet the demands of consumers.”

Nigeria’s Economy To Attract N2trn Via Cabotage

Meanwhile, the Nigerian economy will earn N2 trillion from the maritime sector as the Nigerian Maritime Administration and Safety Agency (NIMASA) goes for the total enforcement of the Cabotage Act.

NIMASA said that the enforcement of the law would provide thousands of jobs for Nigerian seafarers.

The Cabotage Act, which was enacted 16 years ago, reserved domestic coastal trade within the country’s coastal and inland waters to vessels built and registered in Nigeria, wholly owned and manned by Nigerians.

Foreign-owned vessels and companies are, however, allowed to participate in Cabotage trade within Nigerian waters, subject to obtaining a waiver and or a licence from the Federal Ministry of Transport.

LEADERSHIP investigation reveals that foreign firms own about 90 per cent of the vessels in the country while the local operators are groaning under poor utilisation and insufficient capacity.

To start the enforcement, NIMASA last week presented to the public a five-year plan to end waivers given to foreign vessels trading on the nation’s waters thereby allowing Nigerians to take over the sub-sector.

The director-general of NIMASA, Dr. Dakuku Peterside, made this known at a two-day stakeholders’ consultative meeting in Lagos.

Peterside said that the cessation of cabotage waivers would begin with a two-year plan to end waivers for fishing trawlers, tugs, offshore supply vessels, barges, houseboats, tankers of below 10,000 GRT and vessels such as FPSOs.

But, LEADERSHIP learnt at the weekend that the country loses over N2 trillion annually to the non-enforcement of the Cabotage Act. For instance, Nigerian indigenous shipowners are doing less than 50 per cent of the crude oil affreightment in the country. It is estimated that if indigenous shipowners could do crude oil carriage, the country could generate over N1.5 trillion into the economy.

Also recently, CBN governor, Godwin Emefiele said that the full implementation of the Cabotage Act would raise N2 trillion annually, noting that it was an additional revenue stream for the government if fully implemented.

The Act stipulates that all cargoes and passengers in the inland and coastal waters be transported by ships and ferries built, owned, crewed and manned by Nigerians.

Emefiele said: “Contrary to the requirement of this Act, there are several foreign-owned vessels providing shipping services locally. Of about 600 ships that operate within our waters, only about 60 are owned by Nigerians and they are mostly idle, in violation of the Act. Industry sources suggest Nigeria may be losing as much as N2 trillion annually from this anomaly.”

Also, the pioneer president, Nigerian Shipowners’ Association (NISA), Chief Issac Jolapamo, said that the strict enforcement of the Cabotage Act in the carriage of crude could generate N1.5trillion.

He said: “I can say conveniently that even in the crude oil carriage that they do today, if Nigerians are doing 50 per cent carriage of their allocation, we will be putting back more than about N1.3 trillion or N1.5 trillion into the economy and what is our budget? If we are putting N1.5 trillion or thereabouts into the economy and the multiplier effects of it are the jobs it would have created.”

Meanwhile, the Nigerian Chamber of Shipping has called for concerted efforts towards resuscitating the Ajaokuta Steel Company so that the country could build ships with a functional steel company, which would, in turn, encourage the springing up of cottage industries.

The director-general of the chamber, Obigali Obi, said that “there is nothing wrong in the administration of the Cabotage Act, as that will help to create the needed jobs for Nigerians. But we need to tread with caution while trying to implement that, knowing that we are dealing with an international trade variant of our economy.

“Many of the infrastructure that we need to anchor this on are not yet available; the manpower to manage the platforms and provide services onboard are still not there,’’ she said.

Another stakeholder, Mrs. Margret Orakwusi, appealed to the federal government to ensure that banks grant loans to Nigerian shippers at a single-digit rate to boost ship ownership and development.

She lauded the government for thinking in the same direction as the operators. “If we get it right now, the economy will be shielded from negative international economic reflex. Cabotage is good; it will resonate the sector and foster expansion in all ramifications while engaging the cadets in the system.”

ExxonMobil, Others Not Leaving Nigeria, Says Kachikwu

The executive director and production manager of ExxonMobil Nigeria, Richard Laing, has told the federal government that there was no truth in the rumor that the company plans to exit Nigeria.

The clarification came when the minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, visited the company’s offshore floating production storage and offloading known as ERHA FPSO at the weekend.

Kachikwu also dispelled rumours that other oil companies are planning to exit Nigeria.

In a statement issued by the ministry, it said that the visit to the FPSO was to provoke the oil production fields of Nigeria to ramp up their crude production and unlock gas in line with the Gas Revolution Agenda of the #7BigWins.

The minister, who addressed key business concerns of ExxonMobil Nigeria, urged them not to focus only on the profitability of the firm but to also give back to the society having been doing business in the country for a long time.

Kachikwu commended the crew for their sacrifice, urgency of attention and value-addition while conveying President Muhammadu Buhari’s deep commitment to the welfare of those on the production fields.

He name-checked the Department of Petroleum Resources (DPR’s) automation initiatives that include Crude Oil and LNG Tracking (COLT), Automatic Downstream System (ADS) and Accelerated Lease Renewal Programme (ALRP). He also referenced the community engagement drive of the organisation evidenced by the peace and harmony seen in its operating areas.

Kachikwu was received by Laing, executive director and Production Manager of ExxonMobil Nigeria while Scott Hommema, the general manager, Deepwater Operations and Joint Interest, took him and his delegation on a tour of the FPSO.

The ERHA field is located in Oil Mining Lease (OML) 133 and ExxonMobil Nigeria holds a 56.25 per cent participating interest while Shell Nigeria Exploration and Production Company (SNEPCO) holds the remaining 43.75 per cent share. The Floating, Production, Storage and Offloading (FPSO) has about 2.2 million barrels of storage capacity making it one of the largest of its kind, globally.

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