www.premiumtimesng.com/news/headlines/203381-presidency-breaks-silence-explains-hike-fuel-price.html

Read his full explanation below.

THE FUEL PRICING DEBATE: OUR STORY

Fellow Citizens:

I have read th


I have read the various observations about the fuel
pricing regime and the attendant issues generated. All
certainly have strong points.

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.
We expect that with competition, more private
refineries, and NNPC refineries working at full
capacity, prices will drop considerably. Our target is
that by Q4 2018 we should be producing 70% of our
fuel needs locally. At the moment even if all the
refineries are working optimally they will produce
just about 40% of our domestic fuel needs.

You will notice that I have not mentioned other
details of the PPRA cost template. I wanted to focus
on the cost component largely responsible for the
substantial rise, namely foreign exchange. This is
therefore not a subsidy removal issue but a foreign
exchange problem, in the face of dwindling earnings.

Thank you all.

VICE PRESIDENT YEMI OSINBAJO, SAN
May 13, 2016

Increase the minimum wage to 50,000 and I will dance to your every tunes sir