News

Petrol price hike imminent as NNPC declares N120bn subsidy unsustainable

Published

4 years ago

March 26, 2021

The Group General Manager, Nigerian National Petroleum Corporation, Mele Kyari, on Thursday said the Federal Government subsidises Premium Motor Spirit with about N120bn ($263.25m) monthly..

He said while the actual cost of importation and handling charges amounts to N234 per litre the government had been selling at N162 per litre therefore bearing the difference.

Kyari spoke at the weekly ministerial briefing at the Presidential Villa, Abuja.

He said the NNPC could no longer afford to bear the cost, saying Nigerians would have to pay the actual cost sooner or later.

He argued that market forces must be allowed to determine the pump price of petrol in the country.

Although he claimed the nation was not in a subsidy regime, he said the government was trying to exit what he described as ‘under-price sale of PMS’.

He said, “Today, NNPC is the sole importer of PMS. We are importing at market price and we are selling at N162 per litre today.

“Looking at the current market situation today, the actual price could have been anywhere between N211 and around N234 per litre.

“The meaning of this is that consumers are not paying for the full value of the PMS that we are consuming and therefore, someone is bearing that cost.

“As we speak today, the difference is being carried on the books of the NNPC and I can confirm to you that the NNPC may no longer be in the position to carry that burden and because we can longer afford to carry it on our books.

“As we speak today, I will not say we are in subsidy regime but we are in a situation where we are trying to exit this under-price sale of PMS until we come to terms with the full value of the product in the market.

“PMS sells across our borders anywhere around N300 per litre and in some places up to N500 to N550 per litre.

“Our current consumption is evacuation from the depots about 60 million litres per day; we are selling at N162 to the litre, and the current market price is around N234, actual market price today.

“So, the difference between the two, multiplied by 60 million x 30 will give you per month. I don’t have the numbers now. This is a simple arithmetic that we can do but if you want exact from our books, I do not have it at this moment but it is somewhere between N100bn and N120bn per month. I don’t have the exact number.”

The NNPC boss explained that upon full implementation of deregulation, he expected that all oil marketing companies would commence import, thereby lifting the import burden off the corporation.

He said once that was done, the Direct Sale-Direct Purchase programme would end automatically because market forces would then determine import and export.

Admitting that access to foreign exchange was one of the major reasons why oil marketing companies had not started importing, Kyari said work was ongoing on this in conjunction with the Central Bank of Nigeria.

As soon as the issue was sorted out, he said, oil marketing companies would also resume import of petroleum products.

Answering questions on the two agreements between Nigeria and Niger Republic for the importation of petrol from the neighbouring country to Nigeria, the Minister of State for Petroleum Resources, Timipre Sylva, explained that it was a way to boost trade between the two countries.

He said Nigeria wanted to legalise the thriving illegal petroleum products sale already going on between the countries.

The minister said, “You know that Niger is a smaller country and Nigeria is more experienced in oil exploration than most countries in Africa. You find out that most of these countries have these constraints.

“Although, we have this agreement with Niger but they have constraint on how to deliver on it to this country because of the contract they have with the Chinese.

“So, if we realise that they have constraints we can change. The whole idea is that Niger has 20,000 bpd which is even bigger than their consumption.

“There is already illegal trading going on between Nigeria and Niger. So, what we want to do is to see how we can legalise it.

“We want to begin to create business with our neighbours. This is what ECOWAS and AU are trying to encourage. That is inter-regional trade and begin to trade among ourselves.”

Sylva also said the process of awarding marginal oil field licences had been completed.

He said the 161 bid winners had been notified and that 50 per cent of them had paid the signature bonuses.

He explained, “The process has been completed and there were 161 winning bids and they have been notified and we have started receiving signature bonuses paid by the winners.

“At least, from the last account report I got from DPR, almost 50 per cent of the winners have paid. What we are expecting from the whole process is about $600 million and of course we have also given allowance for people to pay in naira so you have to pick which currency to pay in – in naira or dollars.

“So, at this point we cannot give any figure in any currency (referring to how much is paid so far) but just to tell you that payments have been encouraging and they have up to April 20 to pay.”

On the Petroleum Industry Bill pending before the National Assembly, Sylvia said he had received assurances from the federal lawmakers that it would be passed into law in April.

He also justified planned rehabilitation of the Port Harcourt Refinery, saying the Federal Government remained committed to its promise to deliver functional refineries to Nigerians in due time.