FG To Remove Fuel Subsidy In 2015

President Jonathan has proposed to cut fuel subsidies in half in a bid to reduce spending after a retreat in global crude prices.
According to David Mark,  the  Senate  President,  the government   plans to reduce fuel subsidies next year to N458.6 billion  ($2.6 billion) from N971.1 billion , citing a revised 2015 Medium Term Expenditure Framework and Fiscal Strategy Paper submitted by  President Jonathan.
The global collapse in oil prices is biting into Nigeria’s income, 70 percent of which comes from crude exports. Finance Minister Ngozi Okonjo-Iweala plans to cut expenditure by 6 percent next year and lower the budgeted benchmark oil price to $73 per barrel, from $77.5 this year.
Kerosene subsidies will also be cut to N156 billion, from N250 billion, according to the proposal.
The landing price of crude oil as at Thursday, was $78.10 per a barrel, as against the price of $100 per barrel a few months back. The country’s budget was based initially on $78 when the  price of crude oil was hovering  between $90 and $100 per barrel.
The price of the commodity has dropped by more than 28 per cent since June, spurred by slow/stagnant global economic demand, and increasing oil supplies from shale oil in the United States, record of oil productions in Russia and the resumption of  production in the oil producing countries plagued by unrest .
The government’s last attempt to scrap the subsidy in January 2012 sparked a week of strikes and protests, forcing the government to partially reinstate it. Unions and activists opposed the subsidy’s removal and said the government should fix its poorly maintained refineries and tackle corruption before raising cost for Nigerians.
The country has four refineries that have capacity to refine 445,000 barrels of crude oil per day but they have been moribund for several years.
The deliberate attempt by the government not to   rehabilitate   or privatise them has put the burden of importing petroleum products, especially Premium Motor Spirit (PMS) or petrol, on the government at very high expense. The total production capacities of the refineries  currently is not more than  seven million litres of pms.
The country  consumes an average of 40 million litres of PMS daily, most of that being supplied by the Nigerian National Petroleum Corporation through its subsidiary, the Petroleum Products Marketing  Company (PPMC).
But Diran Fawibe, the chairman  and chief  operation officer  of  International Energy  Services,  said  that  the  move by President Goodluck Jonathan  to cut the  amount to be spent on  subsidy  is a  step in the right  direction.He however fears that the labour unions and civil society groups  may not  allow Jonathan to implement  the  policy, especially  in an election year.
He urged the president to carry the union members and civil society groups along.
He said  there would be  no point  for the president to  move  such an idea  without being able  to  carry it  out, adding  that  the cost of fuel subsidy  would continue  to balloon, since  the country  has  no  functional refineries .       
The Dangote  Refinery which is the  most viable one  in sight,  he said, would not  come  on stream until 2018.
Spending N458.6 billion on fuel subsidy   according to him ,is still a lot of money and it would amount to creating  jobs  for  indigenes  of other  countries .
Speaking in the same vein , Austin Nweze of Pan Atlantic University said  that  subsidy  would  create  jobs  for  other  countries at the expense  of  Nigerians
He said in the short run, the cut may affect the price of fuel, as it would go up temporarily, but in the long run, it would benefit Nigerians.
  The government, he said, should remove subsidy completely and encourage the establishment of refineries in the country, adding  that such a move  would  encourage competition in the price of  fuel.
He however expressed fears that corruption may pose as an obstacle, as those that are benefitting from the corrupt system may work against the proposal.
Do you think this will solve the issue of depreciation of crude price? or the fall in value of naira? 
We all knew what happened in January 2012 when it was partially removed first, Just hope this won’t be worst .

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