Vice-President Yemi Osinbajo said on Friday that the federal government was left with no other option but to liberalise sales of petrol.
The announcement of the new price regime sparked a wave of criticisms, with the Nigeria Labour Congress (NLC) threatening a show down if the government fails to revert to the old rate of N86.50.
The NLC is not alone in the demand: Femi Falana, Lagos-based lawyer; Shehu Sani, a senator of the ruling All Progressives Congress (APC); Dino Melaye, also a senator of the ruling party, all opposed the N145 which the Petroleum Products Pricing Regulatory Agency (PPPRA) fixed as the price of a litre of petrol.
But Osinbajo, who said he closely monitored the reactions which trailed the new pump price, said: “the most important issue is how to shield the poor from the worst effects of the policy”.
“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,” he said in a statement.
“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.
“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.”
He gave a detailed explanation on the factors that brought about the development.
“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,” he said.
“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).”