The federal government on Monday said the price of fuel will return to the old pump price of N97 per liter as it begins a gradual withdrawal of fuel subsidy next year.
Minister of State for Petroleum, Dr. Ibe Kachikwu, who disclosed the government’s decision while appearing before the Joint National Assembly Committee on Finance, Appropriation and National Planning on the consideration of Medium Term Expenditure Framework (MTEF), said the subsidy put at over N1 trillion in 2015 was no longer sustainable.
Kachikwu said the gradual removal strategy would begin with the nation’s return to the pump price of N97 per liter from the current N87 because the government has no money to sustain the current price.
He added that if the strategy was not effective, the government would be compelled to consider total withdrawal of fuel subsidy.
“The total subsidy figure for 2015 when taken along with the NNPC will be in excess of N1 trillion. We can get this specifics but the point is largely that it does not involve NNPC because the agency takes its off-cuff. We will work towards taking those figures off our budget in 2016,” he said.
He said with the federal government’s current pricing work, it was clear that subsidy was no longer sustainable. “The government doesn’t need to fund subsidy. There is energy around the removal of subsidy. Most Nigerians we talk to today would say, that’s where to go,”he stated.
The minster said: “I have since left the dictionary of subsidy by going to price modulation, which is a bit more technical. Price of refined products today is N87. It was N97 before it was removed and we really have to go back to that because we don’t really have the finance to remove it. There are lots of safety barometer between the N87 and N97 per litre regime between which government does not have to fund subsidy.
“Yet the prices would be fairly close to what it used to be today. That is the first mechanism we are going to work on. It is when that mechanism fails that we will begin to look at a total subsidy exit. We believe we could achieve that.”
Kachikwu, who further explained the mechanism being put in place to increase oil production volume in 2016, said with the projection by OPEC, the government expects an increase in oil price from $38 per barrel in early January to between $45 and $50 per barrel. “We expect it to hit $70 per barrel in 2017,” he added.
In her submission, the Minister of Finance, Mrs. Kemi Adeosun, said the government had put the machinery in place to reduce personnel cost by N100 billion in 2016.