6th January, 2012
As Nigerians are still in shock over what is now being described as President Goodluck Jonathan’s new year ‘gift’ to Nigerians in the form of fuel subsidy removal, the Minister of Transport, Senator Idris Umar, has said the decision is necessary to boost the nation’s maritime sector and the nation’s economy in general.
Delivering a keynote address at a seminar organised by the Maritime Reporters Association of Nigeria (MARAN) on Removal of Fuel Subsidy and its Impact on the Maritime Industry at Ikeja, Lagos, the minister listed benefits of the fuel subsidy removal to the maritime industry to include better opportunities to address loss of revenue and favourable terms of trade such as Cost-Insurance-and-Freight (CIF) in preference to Freight-on-Board (FOB).
He said smuggling of fuel will become unattractive in a deregulated regime and challenges of piracy and armed robbery at sea will be reduced to the barest minimum because factors that encourage these vices will substantially reduce.
The Federal Government had on 1 January, through the Petroleum Products Pricing and Regulatory Agency (PPPRA), raised the pump price of petrol from N65 to N141 per litre.
Justifying the hike, the minister assured that the subsidy removal, “will enhance indigenous capacity through effective implementation of the Cabotage Act and there will be acceleration of economic development through investment in critical infrastructure such as port development and construction of Inland Container Depots (ICDs). Non-removal of subsidy has discouraged competition and stifled private investment. Due to lack of deregulation, investors have shied away from investments not only in the Oil and Gas industry but also in the Maritime Sector,” the minister stated.
“At the moment, the pump price is fixed at N65 per litre and the government is contributing about N73.49 per litre, taking into account costs such as landing, distribution, bridging and profit margin. Therefore, under the current downstream sector structure, prices are not determined by demand and supply. The far-reaching implication of this price regime is the creation of distortions that result in huge economic costs such as rent-seeking behaviour and smuggling activities”, he disclosed.
He said the major beneficiaries of subsidy are the rich, middle class and some neighbouring countries where the products are smuggled oftentimes. He said that in the light of current realities and the need to stimulate economic growth, it is imprudent to continue to retain fuel subsidy.
Umar said the current transformation agenda of President Goodluck Jonathan has seen the need to open up the sector for wider private sector participation to allow inflow of foreign direct investments which will have positive implications for the economy.
The Minister said: “The issue of Petroleum Subsidy is familiar to Nigerians. Over the years, subsidy on Petroleum Products (Diesel, Petroleum and Kerosene) have been subjected to progressive reduction as a matter of socio-economic necessity, whereby the price of Diesel (AGO) is completely regulated to zero subsidy level. However, Premium Motor Spirit (PMS – Petrol) and Household Kerosine (HHK) are still being subsidised despite the unsustainability and eminent threat to the socio-economic well-being of the country”.
“I feel personally persuaded and convinced that the only option left for us as a nation is to follow the line of successful nations who had long deregulated and allowed market forces to determine prices of petroleum products. Obvious benefits of a deregulated downstream sector will include; free operation activities in the sector, attraction of new investors to the market thereby increasing competition and promotion of overall higher productivity. In addition, it implies limited government intervention and reduces scarcity by ensuring adequate supply of petroleum product. Government will equally be absolved of this burden and the freed resources can be re-invested in social and infrastructural development projects in sectors such as health, education, power supply, water and agriculture, roads, rail and urban mass transit”, the Minister stated.
The MARAN Seminar which took the form of a panel discussion had the Minister of Information, Mr. Labaran Maku, former Minister of Interior Captain Emmanuel Ihenacho and Senior Special Assistant to the President on Maritime Services Mr. Leke Oyewole as Panelists.
The other Panelists include Chairman Indigenous Shipowners Association of Nigeria Chief Isaac Jolapamo, Managing Director of Lagos Deep Offshore Logistics (LADOL) Base Dr. Amy Jadesimi, Managing Director of Nigerian Ports Authority Engineer Omar Sulaiman and Executive Director Maritime Safety and Shipping Development of the Nigerian Maritime Administration and Safety Agency (NIMASA) Dr. Ishyaku Shekarau.