The Minister of State for Petroleum, Ibe Kachikwu and state governors prevailed on President Muhammadu Buhari to hike fuel price from N86.50 to N145 per litre, a top government official told journalists in Abuja last night.
The official, who pleaded anonymity, said Buhari, who was concerned about the effect of fuel price hike on the average Nigerian, had strongly resisted the proposal by Kachikwu for several months but “succumbed reluctantly this month when he (Buhari) was presented with the stark reality of the dropping oil earnings and foreign reserves situation.”
The official said apart from this, “pressure from state governors whose allocation from FAAC has been dropping was also a significant factor that swayed the president.”
He said Buhari would not have agreed to the new fuel pricing regime if he had not been presented with the compelling evidence that Nigeria’s declining foreign earnings from oil would be further devastated unless independent oil marketers and other interested entities are encouraged to import fuel.
He said: “The amount required for fuel importation alone will easily take about more than half of the $550m foreign earnings.
If the country continues doing that the oil revenue left for FAAC sharing would be significantly reduced with the possibility that a situation where there would be nothing left to share between federal government, states and local governments exists in the near future.
“Although NNPC is meant to supply only 50 per cent of the local fuel supply and independent marketers making up the balance, none of the marketers has been able to source forex from the CBN this year and therefore cannot sell at the prevailing price regime and make a profit.
If the federal government continues with NNPC alone importing oil, and trying to fill the gap left by the independent marketers by dedicating more export crude for domestic consumption, the depleting impact on the oil earnings would continue to worsen.
And when this is added to the fact that already about 27 states cannot pay salaries because of the dwindling foreign earnings, the situation becomes even worse. Even some oil producing states like Bayelsa are affected,” he said.
He added: “With the drastic reduction in the foreign earnings in April, what would be shared at the next FAAC is expected to be the least ever, when the meagre $550m oil earnings are converted to Naira.
The sharp reduction in government revenue particularly from oil earnings due to low price regime in the international market has been exacerbated by domestic factors such as recent sabotage by disgruntled and faceless militants in the Niger Delta”.