FG Spent $1bn On Kerosene Subsidy In 2015 – Osinbajo | Independent Newspapers Limited
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FG Spent $1bn On Kerosene Subsidy In 2015 – Osinbajo

Posted: Nov 29, 2016 at 8:37 pm   /   by   /   comments (0)

Charles Okonji

The Federal Government on Tuesday lamented the low usage of Liquefied Petroleum Gas (LPG), which is also known as cooking gas, saying that this has taken its toll on the nation’s economy, as it spent $1 billion on kerosene subsidy in 2015.

Vice President, Prof Yemi Osinbajo, who disclosed this at the “Domestic LPG Implementation Stakeholders Workshop” in Abuja, which was organised by the Office of the Vice President, Ministry of Petroleum Resources and the Nigerian Liquefied Natural Gas (NLNG), pointed out that using current exchange rate of the Central Bank of Nigeria (CBN), the $1 billion spent on kerosene subsidy would translate to about N310 billion.

He stated that in spite of the fact that Nigeria’s total domestic LPG grew from a low of 50,000 metric tons per annum (MTPA) to approximately 400,000 Metric Tons Per Annum (MTPA) in 2015 due to NLNG’s intervention, Nigeria’s per capital consumption of 2.5 kilogrammes (KG) remained low compared to its peers in Africa.

Osinbajo said: “The low level of LPG consumption in Nigeria has resulted in heavy dependence on kerosene and firewood as primary domestic cooking fuels in majority of approximately 36 million Nigerian households.

“This reliance on kerosene and firewood has substantial economic effect. Government has had to take in huge subsidies, with over $1 billion spent in 2015 on kerosene subsidy. A significantly high rate of deforestation continues to be recorded as over 95.76 million metric tons of firewood was used in 2015,” he added.

He explained that the low consumption of LPG was irrespective of the superior health, environment and energy costs of LPG over other competing fuels, such as kerosene.

According to him, what appeared an irony was the fact that most of the LPG produced in Nigeria was exported, while “our consumption level is low, over 40 percent of our domestic consumption in 2015 was imported.”

Osinbajo maintained that the huge importation of LPG for domestic consumption had negatively impacted on the country’s foreign exchange outlay and also limited domestic supply of LPG.

He stressed that LPG had considerable benefits, which included cost-effectiveness and provision of better health benefits than firewood and kerosene, both of which had been identified as the cause of more than 50 percent of over 93,000 deaths.

The vice president disclosed that the federal government was considering a number of interventions in the LPG industry that would among others lead to a significant reduction in the rate of deforestation and create millions of direct and indirect employment opportunities for Nigerians.

He said: “As part of this administration’s commitment to grow the domestic LPG industry, an inter-ministerial committee on the expansion of domestic LPG in Nigeria has been set up, and I have the privilege of chairing that committee.

“This committee would oversee the implementation of identified interventions under the domestic LPG expansion framework, starting with the conversion of additional four million households to LPG use as cooking fuels within two years, progressing to 10 million households over five years and eventually converting additional 21 million households over 15 years, by addressing the challenges inhibiting market penetration,” he stressed.

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, highlighted the need to culminate all the various gas and LPG policies with the regulatory framework that would boost the business environment.

Kachikwu said that a successful implementation of the intervention strategies would require an investment of up to $25.2 billion over the next couple of years, adding that the investment would be used in providing infrastructure among others.

Tony Attah, the Managing Director of Nigeria LNG, stated that to unlock the potentials of the LPG industry, the Federal Government should intervene by removing fiscal and regulatory bottlenecks necessary for creation of a conducive business environment for private sector investment in all segments of the value chain.

According to him, an aggressive and well-coordinated market expansion strategy should lead to the growth of the Nigerian LPG market at annual growth of up to 32 per cent from the current level of 400,000mtpa to over three million mtpa in five years.