The local production of Premium Motor Spirit, otherwise known as petrol, by Dangote Refinery, Port Harcourt Refining Company and others in Nigeria is not going to change the pump price of the commodity, the Nigerian National Petroleum Company Limited has said.
The NNPCL’s Group Chief Executive Officer, Mele Kyari, who
disclosed this during an interview on Arise television in Abuja on Thursday,
stressed that the notion that petrol prices would reduce once the country
starts domestic production was false.
Kyari confirmed that the Dangote Refinery, which was
inaugurated on May 22, 2023, by former President Muhammadu Buhari, would start
pushing out products by the end of July and early August.
He also stated that the Port Harcourt Refinery would be
delivered by the end of the year, adding that the facility was expected to
further boost local production of petrol.
But Kyari declared that despite the volume of petrol being
expected from these facilities, the cost of the commodity would not reduce,
regardless of the fact that the product was produced locally.
“There is a notion that if the product is processed locally,
prices will reduce. Let me make it clear that it is not going to change
anything. If you produce locally, the refineries will also input the cost of
production and other things and it will be sold at the current price.
“There will also be no subsidy when local production starts
because there is no cash-to-back subsidy, this country no longer has the
resources to continue with subsidy,” Kyari stated.
Fuel queues
Speaking on when the fuel queues being witnessed across the
country would clear, during another interview on Channels TV, the NNPCL boss said the queues would not exceed
Saturday.
“I don’t see it staying beyond another day or two, maximum.
It can actually be on Saturday. We have supplies. The key trouble with the PMS
system is supply, but I have supplies.
“There are over 810 million litres of PMS in depots, tanks
and fuel stations across the country, so you don’t have the problem of
transferring those from marine to land, you already have them on the ground,”
he stated.
He validated the PMS pricing document for various states
that trended on Wednesday on the internet, stating that the document was from
the NNPCL.
“You have seen a document in the space out there. Every
company does this. It is a marketing document. It was not a price announcing
document, every company keeps this record and adjusts it appropriately on the
basis of changing conditions in the market.
“So what you saw was
just an internal company document that found its way into the internet. It is an
NNPC document but it was not intended to be an announcement and is not an
announcement, because it can change the next day,” Kyari stated.
On whether there was enough product in-country, he said,
“Today I have 1.8 billion litres of PMS and that means that if we don’t do
anything, I’ll have sufficient fuel for the next 30 days in my hands.
Kyari explained that the company had over 800 million litres
of petrol on land, stored in filling stations, tank farms and depots, while its
total stock for both marine and land stood at about 1.8 billion litres.
“But, of course, the way we supply is not this way, so we
maintain this level of supply consistently. That means you will see the arrival
of products every day so that you continue to maintain that level of safety.”
‘Subsidy not realistic’
Speaking to journalists after a meeting with the National
Chairman of the All Progressives Congress, Senator Abdullahi Adamu, at the
party secretariat in Abuja on Thursday, Kyari revealed that the administration
of President Bola Tinubu had concluded arrangements to have one of the four
refineries repaired and operating at an optimal level before the end of the
year.
The NNPCL boss argued that it was no longer justifiable to
continue subsidising the commodity given the high opportunity cost the Federal
Government was suffering from funding it.
Kyari, who was received by the APC chairman and members of
the National Working Committee at about 12.30 pm, confessed that the country
could no longer sustain the expensive subsidy regime.
According to him, over 38 per cent of the total fuel
distributed in the country was consumed by Lagos, Abuja, Kano and Rivers.
Kyari explained that following the hike in pump price and
the resultant effect on commercial fare, the president was working out some
palliative measures to ease the pains of Nigerians.
He also added that there was an ongoing process of
rehabilitation to ensure one of the refineries was ready this year.
Kyari lamented that despite its N2.8tn indebtedness to the
NNPCL, the Federal Government had yet to release funds for 2022 and 2023
subsidies.
He said, “There was a subsidy in 2022 but in 2023, not a
single naira was provided for the purpose. And ultimately while we held back
our fiscal obligations, we still have a net balance of over N2.8tn that the
federation should have given back to the NNPC.
‘’For any company, when you have negative N2.8tn, there is
no company in the whole of Africa that will lend to you. You cannot have
receivables. The provision of subsidy is there but absolutely there is no
funding for it. It means it is only on paper. It doesn’t exist.
“We can no longer bear it. If we continue, we will run into
defaults and the default of NNPC is the default of Nigeria. Once NNPC goes into
default and liquidity, it affects every borrowing done by the country, even the
sub-nationals. Your lenders will come back to you and say your country can no
longer pay.
‘’The only way you can stop this is to stop this
conversation around subsidy. It is why Mr President announced that the subsidy is
gone. In 24 hours, the bond market appreciated. It is nothing else other than
the statement around subsidy and balancing of the apex market. These two
elements are a major concern for every investor all over the world. Every
partner that we have is worried about.’’
Inflation expected
Kyari acknowledged that the price increase would trigger
inflation, noting that the market forces would determine what happens
subsequently.
He noted, “Before today, the average subsidy level was
N400bn every month. There is nothing anybody can do about it. There is this
common argument that the masses will suffer. I agree that once you increase
prices of this proportion, as it has happened, it will have an impact on
inflation. There is no doubt about it. The market determines what happens next.
Even inflation in many countries goes up when you have economic indices become
difficult.
“Mr. President’s target is to have seven per cent growth of
GDP. You cannot have it if you have this disruption in your demands and
consumption pattern. Very many of us here have at least two cars in our houses
including myself. When you buy fuel of 100 litres in an SUV, you are literally
subsidising three litres with N100 for
all of us.
‘’Even the consumption itself is clearly skewed in locations
and states where the level of economic activities are higher than the others.
It is very understandable and that is why people can afford it in Abuja, Lagos,
Port Harcourt, and Kano. So over 38 per cent of the total fuel distributed in
this country ends up in these places. All the other parts of the country suffer
for it and you can see the relativity.’’
Kyari submitted that the price at which petrol was being
sold now is the current market price of the commodity.
‘’The price you are seeing today at our stations is the
current market price of the commodity and what this means is that prices in the
market can go down at any time and the market will adjust itself. The beauty of
this is that there will be a new entrance because oil marketing companies now will
want to invest, they have been reluctant to come in because of the subsidy,’’
he stated.
With the latest development, the NNPCL chief said the market
would regulate itself, adding that oil marketing companies could now import
products or buy locally-produced ones and take them into the market and sell at
commercial prices.
He added, ‘’You would see competition even with NNPCL, and
by law, the company can’t do more than 30 per cent of the market going forward.
So competition will surely come in and definitely, the market will regulate the
price itself. It is an instantaneous price and in two weeks, you will see the
adjustment that is happening in many jurisdictions.
‘’But ultimately, you would see changes in price downwards
and that is very likely. Efficiency will come in and every lacuna in the sector
will be taken out because of the new situation.
‘’The current price is not fixed and will surely change and
we did it to announce various prices depending on our cost by location and by
the realities around us knowing full well that the NNPCL is the single supplier
of the market today and we are seeing that exit coming very quickly. There will
be no monopoly and we will not continue to be the only supplier.’’
Meanwhile, the House of Representatives has called on the
Federal Government to end subsidies on not just petrol but all petroleum
products.
The House, however, urged the government to roll out
palliatives and other measures to cushion the effects of the removal of the PMS
subsidy on Nigerians.
These were part of the recommendations by the House Ad Hoc
Committee on the Need to Investigate the Petroleum Products Subsidy Regime in
Nigeria, which the lawmakers considered as a Committee of the Whole and adopted
in plenary on Thursday.
Chairman of the committee, Ibrahim Aliyu, had laid the
report, 11 months after the task was assigned to the panel.
The committee recommended that “the Federal Government
should remove subsidies on all petroleum products.”
It also recommended that “the Federal Government should
immediately design measures and palliatives to cushion the effects of the
subsidy removal for Nigerians, effective from this year 2023, through the
provision and procurement of Compressed Natural Gas buses as an alternative
transport system with cheaper fuel consumption.”
The panel also said the government should introduce
intermodal, regional and national transport systems to ease the mass movement
of people across the country.
In addition, the committee recommended that the Nigerian
Midstream and Downstream Petroleum Regulatory Commission should issue stricter
and most appropriate regulations as provided in the Petroleum Industry Act to
ensure that Nigerians were not short-changed through profiteering.
The lawmakers equally said the Revenue Mobilisation
Allocation Committee should lead a reconciliation meeting between the NNPCL,
Federal Inland Revenue Service, Joint Venture Contracts and the NMDPRC on the
utilisation of their crude entitlements.
The report partly read, “With the total deregulation of the
sector, all the agencies involved in crude lifting/security should have a
representative with the Nigeria Navy as a lead agency to physically assess and
document daily crude production and lifting;
Oil swap
“The committee also recommends that the Federal Government
should, as a matter of urgency, liaise with the National Assembly to fashion
out critical areas of economic development, in which the additional revenue
from the proposed subsidy removal will be appropriately utilised.
“A further investigation, through a forensic audit by the
Office of the Auditor General for the Federation, be made to ascertain whether
the N413bn borrowed from the Central Bank of Nigeria for subsidy payments was
refunded after the passage and assent of the 2015 budget as earlier approved by
the President and the report of the Auditor General to be submitted to the
House for further legislative action.
“With the subsidy removal, the Federal Government should
forthwith suspend all Direct Sales Direct Purchase (oil swap) contracts. NNPCL
should act by the provision of the PIA to ensure that the country is not
sub-changed in both production, lifting and sales of crude.
The committee further recommended that the Nigeria Customs
Service and the Weight and Measures Department of the Federal Ministry of
Industry, Trade and Investment be equipped to ascertain the actual daily crude
oil lifting from the country for proper checks and balances.
Another recommendation was that the Nigeria Extractive
Industries Transparency Initiative Act, 2007, be amended by the National
Assembly to be in tune with global best practices.
The panel further recommended that the National Assembly,
especially the House standing or ad hoc committees in the 10th Assembly be
saddled with such responsibility to conduct “a full-scale investigation on the
defaulting oil companies and MDAs that have not met the expectations of the
committee to ascertain their level of involvement or otherwise and further
protect the commonwealth of the country.”
The House on June 29, 2022, resolved to investigate payments
for subsidy on petroleum products, especially petrol, under the Muhammadu
Buhari administration.
The Speaker of the House, Femi Gbajabiamila, had set up the
panel whose probe covered 2017 to 2021, with the mandate to report back to the
House within eight weeks for further legislative action.
The probe was based on a motion titled, ‘Need to Investigate
the Petroleum Products Subsidy Regime in Nigeria from 2017 to 2021,’ which was
unanimously adopted after it was moved at plenary by a member of the House,
Sergius Ogun.
In a related development, the Nigeria Labour Congress has
dismissed reports that it would embark on a nationwide protest against the
increase in the pump price of petrol.
In a statement on Thursday, signed by its head of
information, Benson Upiah, the congress noted that it would keep the public
abreast of its moves.
The union had demanded the reversal of the fuel pump price
while a meeting between the labour leaders and the FG deadlocked on Wednesday.
But clarifying its position following speculations about its
next move, the congress said, “In as much as we are outraged by this mindless
price increase which is intended to bring untold hardship to ordinary
Nigerians, we have no plan to start any action tomorrow (today).
“What we do have for now are organ meetings slated for
tomorrow, Friday, June 2nd, 2023 to deliberate on the price issue. We promise
to keep Nigerians informed on our next line of action after our meetings.’’
In reaction to the fuel price hike, the Edo Civil Society
Organisations on Thursday blocked a section of the Benin/Lagos highway in
protest against the subsidy removal.
The protest, which was held at different locations in the
state, obstructed vehicular movements forcing commuters to trek long distances.
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