Minister of Petroleum, Mrs Dizeani Allison Madueke
The Managing Director and Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane Tuesday reiterated that the move by the Federal Government to remove fuel subsidy in the country would have long-run benefits on the economy.
Rewane made this remark while presenting a speech titled: “Economics of Fuel Subsidy,” at a forum on the oil and gas downstream organised by Access Bank Plc in Lagos.
The economists insisted that fuel subsidy removal would lead to increased market efficiency, even as he pointed out that the policy would be at a high political cost in the short term.
He argued that the Nigerian economy was caught in a cyclical and counter-cyclical vicious cycle.
He stressed the need to fast track growth in the country by an accelerated form of capital accumulation. Rewane put the total cost of subsidy at $276.99 per household.
“More important would be the change in the downstream market structure, from an oligopoly market to imperfect competition. If subsidy is removed, there would be new investment in the entire value chain, productivity would increase, there would improve social programme and reduced government expenditure,” he explained.
According to him, the economics of the Nigerian downstream industry was based on a the certain assumptions among which included that “the Nigerian refineries will never produce or will always produce at a loss, that the Lagos ports will be the only facility for landing refined products, subsidies will constantly be paid and that majors will not increase their investments.”
He added: “The industry is dominated by multinationals and local players, three state owned refineries with total installed capacity of 445,000 barrel per day (bpd). African average capacity is 70,000 bpd. Africa has 50 refineries out of a total of 689 globally
5000 kilometres of integrated pipeline network system and 23 strategic depots”
5000 kilometres of integrated pipeline network system and 23 strategic depots”
Earlier in his opening remark, the Group Deputy Managing Director, Access Bank, Mr. Herbert Wigwe, also called for support for the federal government move to remove fuel subsidy.
According to Wigwe, the oil and gas sector remained critical for the development of the Nigerian economy.
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