Subsidy removal still on course – Adviser

• …Says FG set to increase oil and gas production with new investment climate

By George Okereke

The Special Adviser to the President on Energy, Mrs Olu Verheijen, has affirmed that the Federal Government reserves the right to continue to modulate the pump price of petroleum to avert social unrest, noting however that  such intervention does not negate the fact that subsidy has been removed.

Fielding questions Friday after her presentation at the 4th edition of the Ministerial Press Briefing Series organized by the Federal Ministry of Information and nNational Orientation in Abuja, she argued that despite the occasional intervention to stabilize the price of petrol, the subsidy stands removed.

She said: “We are faced with a revenue crisis which is impacting all Nigerians. To urgently address this, President Bola Tinubu is actively seeking ways to grow revenue and fore to stabilize our economy and currency.

“The Oil and Gas sector is critical to our ability to do so. However, our current oil and gas production and investment levels fall significantly short of our potential.

“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.

“His Excellency, President Bola Ahmed Tinubu is determined to re-write this narrative. His focus is to remove obstacles to investments in Nigeria; improve the Investment Climate; position Nigeria as the preferred investment destination for the Oil & Gas sector in Africa; diversify the economy for the benefit of all Nigerians.”

Recalled that President Bola Tinubu had in August last year said that he would ensure that the pump price of petrol does not rise uncontrolled in order to lessen the hardship of citizens.

But the International Monetary Fund (IMF) had raised some fears earlier this month that if Nigeria continued to maintain the cap on petrol and electricity prices, the country may gulp up to N7 trillion in subsidies in this year.

Speaking against this background,  Verheijen argued:  “On the question of subsidy, subsidy was removed on May 29 (2023). However, the government has the prerogative here, in the US, in the West, certainly in other countries. All governments have the prerogative to maintain price stability and prevent social unrest.”

The Spacial Adviser emphasized that governments reserves the right to intervene citing the case of the US during Covid-19 era, saying: “all governments reserve that right. 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 and the government has the right to intervene intermittently. All governments do so. But it does not negate the fact that the subsidy has been removed.”

She also said the administration of President Bola Tinubu opted for fiscal incentives in the Oil and Gas sector to attract investments.

She said the President has also directed that the contracting and project delivery timelines in the Oil and Gas Sector be reduced from 36 months to six months.

She added: 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 month 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.

On tapping the country’s gas potential, Verheijen said part of the objective of the fiscal incentives that the President recently signed was to reverse the over 70% undeveloped gas reserves, which has stalled the Compressed Natural Gas powered vehicles project.

Noting that inadequate gas supply tops the major issues in Nigeria’s oil and gas sector, she highlighted the need to address the fundamental issues of sufficient supply of the product.

Speaking further on the nation’s underdeveloped gas reserve and its consequences, Verheijen explained that there is an existing fund ready to stimulate investments in gas infrastructure.

Her words: “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 on it. You cannot invest in infrastructure to compress gas if there is no gas.

“We need to address the fundamental issues in sectors so that we can attract capital to the infrastructure and there is no one who is going to invest in midstream infrastructure if they don’t have assurance or line of sight to the attractiveness of gas supply.

“So if the gas suppliers are not making investments because the fiscal terms or the business environment is a very difficult one in which to invest, then it will be very difficult to continue to mature midstream projects and downstream projects because you have to deal with the Abinitio problem which is gas supply.”

According to the Presidential Aide, President Tinubu recently issued some policy directives, including the introduction of fiscal incentives to deepen compressed natural gas, and liquefied petroleum petrol penetration in order to boost the nation’s capacity for gas supply.

These incentives, she noted, were designed to ease the impact of fuel subsidies on transport and enable the displacement of PMS and diesel.

The Presidential Aide also  noted that the directive also aims to stabilise the price of cooking gas in the market and support the transition to clean cooking.

“That is exactly what President Bola Tinubu has done with fast-tracking these policy directives to ensure that we have sufficient gas supply whether we’re trying to export to a get Trans Sahara gas pipeline, whether we’re trying to compress natural gas or liquefied for domestic use, whether we’re trying to have floating LNG as alternative ways of getting gas into the market. All of those things are enabled by these policies that unlock supply,” she said.

On the rising price of cooking gas which has forced many households to resort to charcoal, Verheijen blamed the development on the current foreign exchange crisis, noting that LPG is still substantially being imported.

She said government is working to bring down the prices as the matter “is of great priority to this government.”