MINISTER of Finance, Zainab Ahmed, on Monday, said it was unlikely that the prices of food would rise further because of the increase in the price of petrol.
Ahmed who said this on NTA’s ‘Good Morning Nigeria’ programme, added that most trucks conveying agricultural produce use diesel and not petrol.
She said unlike under previous goverments where subsidy was done on consumption, it would be better if subsidy could be targeted at certain sectors of the productive economy.
She said, “It is true that food prices are going up and as I said earlier on, sensible subsidy is the one that is done on production, not on consumption because when you use gasoline in your car, you burn it and you have to put it in your car again and burn it.
“But if you now change the regime and say any truck that carries food or produce, the diesel price is subsidised, you are subsidising production because it means food items get to the market cheaper.
“But as long as you are subsidising consumption, whether it is fuel or electricity, there will always be the propensity for gain in the system and then there is always the fact that you are subsiding everybody and it is not everybody that needs it.”
Despite series of complaints about the high price of petroleum products, she insisted that the deregulation of the petroleum sector was good for the economy.
Ahmed explained that the Dangote Refinery, which was expected to begin operations in 2021, might not significantly reduce the price of petrol as the refinery would be selling at the international price.
She said, “The Dangote refinery is located within an Export Processing Zone so they are insulated from that.
“When we buy fuel from Dangote, we will be buying fuel at the international market price. The only savings that we will be making is the savings of freight which is shipping.”
The minister noted that efforts were ongoing to enable the petroleum sector to grow, adding that there had been a number of refineries that had been licensed for several years of which none was willing to start refining under the regime where fuel was controlled.
“But we will still have landing cost; labour cost and the marketers will still have to put a margin. These refineries being those that are supposed to have come to operate can now come in because they are assured that when they produce, they can sell at market rate and recover their investments and make some reasonable profits,” she added.
She explained that the deregulation of the sector, which led to the increase in petrol price was good for the economy as it would encourage investments in refineries.
“It will mean more refineries will open, they will employ people and fuel will be available in different parts of the country and not just relying on the government refineries. Those refineries are old and even if we turn them around, we will not be able to operate them at optimal capacity, so while the NNPC is trying to rehabilitate them, we also need to encourage the private sector refineries to come on stream and even state governments that have the capacity,” she added.
The Minister of State for Petroleum Resources, Timipre Sylva, also noted that the pump price of petrol was not expected to drop significantly even if refining crude oil was done locally.
Sylva further stated that the major determinant of the cost of petrol was crude oil, saying as long as it remained high, the cost of petrol would not drop.
According to him, non payment of shipping cost will reduce local production cost.
