BusinessDay

Fuel subsidy extension: FG moves to avert legal crises in PIA

…To forward amendment bill … Proposes 18 months of subsidy extension.

With the approval of the extension of the period for subsidy removal by President Muhammadu Buhari on Tuesday, the federal government said it will seek fresh amendment to the Petroleum Industry Act (PIA), to avert legal crises.

Timipre Sylva, Minister of State for Petroleum Resources had disclosed while briefing State House Journalists in Abuja on Tuesday, that “the extension was the collective position taken by the government on the issue of the fuel subsidy removal”

Sylva revealed that the government will soon propose an amendment to the PIA, that will include an 18 months extension of the current subsidy regime.

The government also revealed plans to fast tract the introduction of alternate fuel for cars, in the form of auto gas.

He disclosed that the conversion of petrol engine cars to gas propelled engines which was proposed last year, as part of effort to stop the fuel subsidy, has reached an advanced stage.

The policy, according to the minister, has “gone far.” “Today, I briefed Mr. President on the progress that has been made on auto gas.”

He revealed that the “ conversion process will begin in March or April”.

Government is targeting over one million cars that will be converted initially, while gas filling stations will also be built, ahead of the government’s fuel subsidy removal plans

“We are also looking at other possible palliatives. Definitely, at this moment, fuel subsidy removal is not on the card.”

Businessday gathered that the government is engaging original gas components manufacturers.

“ We want them to come to Nigeria and set up. They are willing to provide 50% of the funding and we are discussing with the Ministry of Finance on how we can match them with the remaining 50percent.

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The policy, which Sylva stated had gone to an advanced stage, is now awaiting the Federal Executive Council, FEC approval , “once it is approved, the process of Nigerian marketers accessing the funding and conversion and building the gas stations will begin”

By the end of this year, we expect that the refineries will start producing.

On the legal implications of the extension, Sylva revealed that the federal government has looked at the issue of the legality, adding that “ but there is the provisions of six months probation in the PIA, which will expire in February. That is why we are taking steps to forestall any act of illegality

“We will apply for some amendment in the law so that we will still be operating within the law. We are proposing an 18 months extension, but what the National Assembly will approve is up to them, but we will ask for an 18 months extension period.

An Abuja based legal practitioner, Francis Obalim believes that the government stands the risk of breaking its own laws which will be bad for the petroleum sector, unless the PIA is first amended before the extension of subsidy removal.

“ I really don’t know how they can go about getting the PIA amended before the 16th of February, 2022 , when the subsidy is expected to cease officially in accordance with the provisions in the PIA. But as you know, they control the legislature.

“ It will however be a difficult task to do without first amending the Act.
He noted that it was possible that government did not think it through before signing the Act”

Sylva however, said the decision to extend fuel subsidy removal followed meetings with the President of the Senate and also consultation with President Buhari

“So, we are about to give you a collective agreed position so that you will not write from hearsay. What you are going to hear from me is the position of the government in the fuel subsidy removal.

“ President Mohammadu Buhari , has, following engagements with the stakeholders, agreed to an extension of the statutory period for the implementation of the removal of subsidy of Premium Motor Spirit PMS in line with the existing laws.

The Petroleum Industry Act PIA, had provided for a six months period during which the subsidy should be removed, from the date the Act was signed into law.

Since the President signed the Bill into law on the 16th of August, 2021, by the provisions of the Act, fuel subsidy was expected to terminate on the 16th of February, 2022.

But the government in October, said it was providing fuel subsidies up to June, in the 2022 budget.

Sylva, while briefing the state House Journalists after meeting with President Buhari on Tuesday, revealed that the government has agreed to extend the fuel subsidy removal after due consultation, to amongst other things, “ enable the government set modalities for it implementation as well as ensure the protection of the livelihood of all Nigerians, especially the most vulnerable”

The minister who recalled that the PIA had envisaged the potentials for supply dysfunctions with its resultant effects on the economy, added that it “consequently provided for a period of six months from the effective date for the government to affect the services of the NNPC Limited as supplier of the last resort”

The aim is to forestall supply distortions and guide the market readiness, preparatory to migration to a deregulated pricing regime.

With the assent by the President to the PIA on August 16 , 2021, the PMS subsidy removal was therefore expected to take place effective from February 16th , 2022.

The minister revealed that after extensive consultations with all the key stakeholders within and outside the government, it agreed that the implementation period for the removal of the subsidy should be extended.

“This extension is to ensure that the implementation is carried out in a manner that ensures all necessary modalities are place to cushion the effect of the PMS subsidy removal, in line with the prevailing economic realities.”

He disclosed that the government will ensure that it secures all the livelihood of Nigerians, “especially the most vulnerable.”

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