Home Finance FG to rehabilitate railway, power, textile, mass transit etc as palliatives to fuel subsidy removal

FG to rehabilitate railway, power, textile, mass transit etc as palliatives to fuel subsidy removal

by Business News Report

By Omoh Gabriel
The federal Government in its bid to remove subsidy from the down stream petroleum sector envisaged some sectoral intervention in the economy as palliatives to the deregulation exercise. The envisaged sectoral interventions are meant to cushion the immediate, medium and long term effect of subsidy removal from the down stream sector of the oil and gas industry. According to government planned deregulation programme, it will intervene in the economy through the rehabilitation of the railway, power, textile, support to development financial institutions for on-lending to the real sector of the economy, with particular focus on Small and Medium Enterprises, low-income housing and for export oriented industries. The envisaged strategic interventions according to government thinking would help address infrastructure bottlenecks, unemployment and enhanced growth potential of the economy through the diversification of the economic base of the country.
The federal government it was gathered is thinking that the implementation of these measures would begin by the fourth quarter of 2009 which it regarded as very important. The envisaged interventions it was learnt would cost about N 124.3 billion which the President has to seek funding for through a supplementary appropriation bill to be send to the National Assembly soon.
The Federal Government it was further learnt hopes that it would support ongoing mass transit efforts by states and local governments, especially those in urban metropolitan areas in a bid to ameliorate the pains that the envisaged deregulation would visit on Nigerians. Government it was gathered believes that reduced ownership cost of means of transportation in the country should reduce the upward pressure on transportation fares when subsidy is eventually removed from fuel . The Government it was also learnt is at the moment considering the budgetary implications of its intervention plan on transport. This measure it was learnt is to be implemented as a 2009 supplementary budget or captured in the 2010 budget provision.
According to government strategic intervention plan it is to invest in National Railway Networks and support/invest in Metro Rail projects.

Vanguard gathered that this government feels will reduce the current pressure on roads and government maintenance expenses. It is felt that migrating Nigerians from road transportation to rail will reduce the demand for petrol and that inter-city rail will further reduce the cost of transporting goods, especially food products. Railway product as a palliative may be relatively long term, and tough to sell as part of an immediate impact palliative measure. The budgetary implications it was gathered is to be ascertained. And the implemented will come in the 2009 supplementary budget proposal to the National Assembly or captured in the 2010 budget.
According to the Federal Government subsidy removal intervention plan the government in collaboration with local governments will provide vans and trucks to farmers cooperatives to haul products to major distribution centres and cities which it believes will help mitigate the cost of hiring vans to haul agricultural produce and reduce the cost of transporting goods into cities. This proponent of this argument say will directly contribute to the governments 7 point agenda and will reduce the inflationary pressure arising from food prices This is also billed for implementation through the 2009 supplementary budget or to captured in the 2010 budget.
The Proposal of oil sector deregulation before the government is that based on the current indicative price of the Petroleum Price Regulation Agency, PPRA the price of PMS should be around N 98.2 per litre. The government it was learnt is considering that the price of PMS should be allowed to increase within the range of N 89.78 per litre to N 93.73 per litre, depending on the location ,coastal or inter land, reflecting cost-saving measures recently approved by the government and additional measures derived from the reports of two consultancy outfit on the review of PPPRA template.
It was also learnt that the proposal states strongly that additional savings of N3.80 culminating could be made in a price range of N85.98 -N89.93 per litre for PMS which they say is feasible within the next 6 months.
The Proposal from government officials is insisting on a once and for all liberalisation of price based on the fact that phased-subsidy removal will be complicated by political constraints, costs of negotiations when time for review is due, which will not give right signals to potential investors in downstream refinery sector arguing that the cost components of fuel products are quite dynamic, creating a “moving-target” situation.

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