The Minister of State for Petroleum Resources, Timipre Sylva, has said that sustaining subsidy of premium motor spirit also known as Petrol is unrealistic.
Sylvia stated this while debunking the news of permanently reducing the pump price.
In a statement on Thursday, he noted that the Federal government did not at any time promise to keep the pump price of Premium Motor Spirit (petrol) permanently low, adding that the government could no longer bear the burden of petrol subsidy.
He said “After a thorough examination of the economics of subsidising PMS for domestic consumption, the Federal Government concluded that it was unrealistic to continue with the burden of subsidising PMS to the tune of trillions of naira every year, more so when this subsidy was benefiting in large part the rich, rather than the poor and ordinary Nigerians,” he said.
According to him, deregulation means that the government will no longer continue to be the main supplier of petroleum products but will encourage the private sector to take over the role of supplying the products.
“This means also that market forces will henceforth determine the prices at the pump. In line with global best practices, the government will continue to play its traditional role of regulation to ensure that this strategic commodity is not priced arbitrarily by private sector suppliers,” Sylva said.
“Petroleum products are refined from crude oil. Therefore, the price of crude (the feedstock) for the refining process will affect the price of the refined product.
“When crude oil prices were down, government, through its regulatory functions, ensured that the benefits of lower crude oil prices were enjoyed by Nigerians by ensuring that PMS was lowered. At that time, we indicated that an increase in crude oil prices will also reflect at the pump.”
He explained that one of the reasons the country had been unable to attract the level of investments desired into the refining sector had been the burden of fuel subsidy.
He added, “We need to free up that investment space so that what happened in the banking sector, the aviation sector and other sectors can happen in the midstream and downstream oil sector.