The federal government on Friday, March 8, said it is on course on fuel subsidy removal.
It also said that it is working assiduously to ensure the price stability of fuel in the overall interest of Nigeria.
The International Monetary Fund had alleged that the government still maintains subsidies on fuel pump prices and electricity tariffs despite President Bola Tinubu announcing the removal of subsidy.
The special adviser to the president on energy, Olu Verheijen, who spoke at the ministerial press briefing in Abuja, said it is the prerogative of the government to maintain price stability.
She argued that the developed countries including the United States do the same to prevent volatility in the economy.
She therefore said government intervention to stabilise prices does not remove the fact that subsidy has been removed.
She said: “The question of subsidy, the subsidy was removed on May 29, 2023. However, the government has the prerogative whether the US, in the West and other Eastern countries, all governments have the prerogative to maintain price stability and prevent social unrest.
“So if prices are moving, they reserve the right to intervene. It started in the US during COVID. There were a lot of expansionist moves but also subsidies.
“All governments deserve that right. And so if for whatever reason the administration has reviewed that it is not the right time to have prices continue to fluctuate given the level of hardship in the country, given inflation, the government has the right to intervene intermittently.
“All governments do so but it does not take away the fact that the subsidy was removed.”
On tapping the country’s gas potential, Verheijen pointed out that part of the objective of the fiscal incentives that the President recently signed is to reverse the over 70% undeveloped gas reserves.
To do this, she said: “We need to address the fundamental issues in sectors so that we can attract capital to the infrastructure and there is no one who’s going to invest in Infrastructure if they don’t have assurance, the line of sight to the attractiveness of gas supply.
“So, if gas suppliers are not making any investment because the fiscal terms of the business environment is a very difficult one in which to invest, then it will be difficult to continue to mature mainstream projects and downstream projects because you have to deal with the ab initio problem which is gas supply.
“And that is exactly what President Bola Ahmed Tinubu has done by fast-tracking this policy directive to ensure that we have sufficient gas supply whether we’re trying to export, whether we’re trying to compress natural gas or liquefied for domestic use, whether we’re trying to have floating energy as an alternative way of getting gas into the market, all of those things are enabled by these policies.”
She also revealed that “There is a fund that exists and is ready to make investments in infrastructure.
“There are lots of investors who are very interested in making investments in infrastructure, but it’s like building a road without having a car to drive with it. You cannot invest in infrastructure to compress gas if there is no gas. “
She stressed that the needed investment is to be done in a short while, saying, “because we are trying to signal to investors to make these investments as quickly as possible. But each directive has its timeline.”
She however explained that the president’s directive “is a signal to all the participants and stakeholders to move as quickly as he has.”
“These incentives that we just passed will also allow us to ensure that they’re still alive on train seven which is almost far from its construction.
“From those investors’ perspectives until those fundamental investment decisions that they have taken assured supply by some of the actions we’ve taken this week.
“It is the government’s role to set strategic objectives around where it’s trying to go. As a country. We’ve outlined our strategic objective, which is to grow production so that we can grow revenue and use that revenue to enable economic opportunities for more and more Nigerians.
“So the divestments have to be two parties who have the technical and financial capacity to deliver on all those objectives.
“So they will need to have the technical and financial capacity not only to send demand but also to grow production so that we can have more revenue and more opportunities for Nigerians.”
On pricing of cooking gas, she explained that “A significant portion of our gas is being imported. So we are price takers and not price setters.”
She however said: “Because the president was very concerned about the cost of living, he approved the fast-tracking of fiscal incentives to enable more investments into the LPG space with the hope that if we achieve scale, we can bring down costs. And we can also incentivize the domestication of some of our LNG production. We started it, but unfortunately, foreign exchange and the market prices began to increase.
“We’re going to continue to work and look at more opportunities to improve supply and scale up and enable all LPG into the market at affordable prices. It’s a priority of this administration.
“On the latest executive order signed by the President, Verheijen stressed that the ambition of the administration is “to accelerate our economic growth and diversify the economy for the benefit of all Nigerians require timely, credible, clear and consistent policy.”
While admitting that the administration is faced with a revenue crisis, she however said: “President Bola Tinubu is actively seeking ways to grow revenue and forex to stabilize our economy and currency.
“The Oil and Gas sector is critical to our ability to do so.”
She, however, added: “Our current oil and gas production and investment levels fall significantly short of our potential.
Reeling out statistics of the country’s unfavourable contribution to gas production in the continent, she said, “Since 2016, Nigeria has only accounted for only four percent (4%) of
Africa’s total oil and gas investments, despite possessing thirty-eight percent (38%) of the continent’s hydrocarbon reserves. A society is not rich because of its resources but because of what it does with those resources.”
She however said President Tinubu is determined to reverse “this trend and take decisive steps to ensure to conducive business climate and reposition Nigeria as a preferred investment destination for the oil and gas sector.”
She added: “To achieve these objectives, Mr President has issued a Presidential Directive to streamline and clarify the scope of the two Regulators in the petroleum sector to provide certainty and create a conducive business environment.
“Directed the NSA and Special Adviser on Energy to coordinate enhanced security measures in the Niger Delta. Owing to this directive, the TNP pipeline which had been repeatedly vandalized is now enjoying improved uptime; availability has practically doubled since these directives were implemented.
“This has translated to increased liquids of over 200,000 barrels/day being transported over the last 6 months. It has increased the availability of NLNG Trains 1-6 from 57% in 2023 to 70% in Q1 2024.
“The President has also introduced fiscal incentives to deepen Compressed Natural Gas (CNG) and Liquified Petroleum Gas (LPG) penetration. These incentives were designed to: Use the impact of fuel subsidies on transportation cost and enable the displacement of PMS/Diesel and; contribute to stabilizing the price of cooking gas in the market and support the transition to clean cooking.”
On other reforms to improve the investment environment, she said: “Following extensive engagements, analysis, and benchmarking, with industry operators and regulators, the President has taken further action to address foundational issues identified in the course of these engagements. Mr President has initiated the amendment of primary legislation to introduce fiscal incentives, reduce project execution timelines, and promote cost efficiency.
“However, recognising the urgency to accelerate investments to stabilise the economy, His Excellency executed these Policy Directives to signal the policy direction of this administration to both the market and regulators.
“The Policy Directives are “Fiscal Incentives for Non-Associated Gas (NAG), Midstream and Deepwater Oil & Gas Developments: This Directive aims to facilitate the monetization of Nigeria’s extensive oil and gas resources. For Gas, 76% of our gas reserves, remain undeveloped.
“This explains why, despite possessing one of the largest gas reserves globally, we lack sufficient gas to meet our domestic need for industry, for power, and cooking.
The fiscal incentives introduced will attract the much-needed investments to enhance energy security, catalyze economic activity, attract essential foreign exchange, and promote job creation.
“Streamlining of Contracting Processes, Procedures, and Timelines: The president has issued directives to reduce contracting timelines and project delivery. Benchmarking and analysis revealed that the contracting cycle takes up to 36 months.
“This Directive should have the effect of compressing this cycle to less than 6 months in line with global averages.
“This will expedite the delivery of oil and gas products to the market and enhance overall value for the country.
“Local Content Practice Reform: This Directive Seeks to ensure that local content requirements are implemented in a manner that does not impede investments or the cost competitiveness of oil and gas projects.
“This Directive aims to reduce the cost premium of operating in Nigeria, presently averaging at 40%.
“We anticipate significant benefits from this reform, including the development of local companies’ capacity, thereby generating additional business opportunities, job creation and boosting economic growth and implementing Partners.”
The presidential aide stressed: “Our need to fuel economic growth at rates that significantly exceed our population growth rate has never been more urgent.
“The President strongly believes that private sector-led growth enabled by clear and inclusive government policies is the most enduring path to prosperity for all Nigerians. We will sustain engagement and collaboration with key investors to ensure we attract capital and capabilities to this sector to catalyze job creation, productivity, and income growth across multiple sectors.
“This administration is focused on enabling transformational economic opportunities to lift millions of hardworking Nigerians out of poverty.”
