By Tobi Soniyi in Abuja
The Vice President, Professor Yemi Osinbajo, has said that the decision to jack up the price of petrol to N145 per litre was not informed by the need to remove subsidy but to resolve the crisis caused by shortage of foreign exchange.
In a statement he issued on Friday in Abuja, Osinbajo said: “This is therefore not a subsidy removal issue but a foreign exchange problem, in the face of dwindling earnings.”
The vice president said he had read the various observations about the fuel pricing regime and the attendant issues generated.
He agreed that all the divergent views expressed so far have strong points.
He said: “The most important issue of course is how to shield the poor from the worst effects of the policy. I will hopefully address that in another note.
“Permit me an explanation of the policy. First, the real issue is not a removal of subsidy. At $40 a barrel there isn’t much of a subsidy to remove.
“In any event, the President is probably one of the most convinced pro-subsidy advocates.
“What happened is as follows: our local consumption of fuel is almost entirely imported. The NNPC exchanges crude from its joint venture share to provide about 50% of local fuel consumption. The remaining 50% is imported by major and independent marketers.
“These marketers up until three months ago sourced their foreign exchange from the Central Bank of Nigeria at the official rate. However, since late last year, independent marketers have brought in little or no fuel because they have been unable to get foreign exchange from the CBN. The CBN simply did not have enough. (In April, oil earnings dipped to $550 million. The amount required for fuel importation alone is about $225million!) .
“Meanwhile, NNPC tried to cover the 50% shortfall by dedicating more export crude for domestic consumption. Besides the short term depletion of the Federation Account, which is where the FG and States are paid from, and further cash-call debts pilling up, NNPC also lacked the capacity to distribute 100% of local consumption around the country. Previously, they were responsible for only about 50%. (Partly the reason for the lingering scarcity).
“We realised that we were left with only one option. This was to allow independent marketers and any Nigerian entity to source their own foreign exchange and import fuel. We expect that foreign exchange will be sourced at an average of about N285 to the dollar, (current interbank rate). They would then be restricted to selling at a price between N135 and N145 per litre. “
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