The Minister of State for Petroleum, Dr. Ibe Kachikwu, says the Nigerian government has suspended the subsidy on petroleum products as at today, December 27, as a result of the current low price of crude in the international market.
Dr. Kachikwu said the non-payment of subsidy would remain the same, as long as market trends allow.
He told reporters on Sunday in Kaduna that if crude prices increase, there would be a review which would be tackled under the newly introduced price modulation in the sector.
The price modulation, according to the Minister, is not an outright removal of petrol subsidy.
On December 17, the Minister said that the government was not interested in the removal of subsidy on petroleum products, but rather a price modulation that would reduce its involvement in pricing starting 2016.
He explained that a periodical review of the Petroleum Pricing Template and a flexible management of the pricing system would be considered.
The price modulation, the government stressed, would be predicated on a 97 Naira per litre projection, which would be a cap on the price of fuel with a gradual increment between the band of the current price of 87 Naira and 97 Naira until a fair price is reached in the pricing review.
Few days after he announced plans for a price modulation, he told reporters that the Nigerian National Petroleum Corporation would announce a pump price of 85 Naira per litre of petrol in January 2016.
Dr. Kachikwu said that the new pump price was according to a PPPRA template which he signed off on Wednesday which would be the first reflection of the price modulation that will kick off fully in the petroleum sector by January 2016.
“If you look at the new PPPRA template that we developed and which I just signed off two days ago, when it is announced you will find out that for now (and I use the emphatic word of the President ‘for now’), the price of the refined product will actually be lower than 87 naira, It will be 85. We will probably announce that in January if the prices hold.
“What that does for you is that its modulating. If it goes up you move up, if it comes down you come down. So we take away the fact of having to go find funds to pay for these subsidies that we cannot afford.
“More importantly we try to be as close to the pump price that we have now as possible,” he said.
Let’s hear what the Minister said in Port Harcourt…
His inspection of the refinery in Kaduna State on Sunday comes two days after a tour of the Port Harcourt Refinery and based on the two visits, the Minister told reporters that a combined daily production of up to 10 million litres of petrol is expected from the four Nigerian refineries by January 2016. A production that is aimed at cushioning the current scarcity of petrol across the oil rich nation.
The production is only 50 per cent of their maximum production capacity of 20 million litres daily, but the minister says more locally refines petrol should be expected as the year unwinds.