The Federal Government denied on Monday that it will reinstate the subsidy on Premium Motor Spirit, or fuel, in the midst of the widespread closure of petrol stations brought on by several issues in the downstream oil industry.
Additionally, it said that rather than a shortage of supplies, pockets of lines in petrol stations around the nation were caused by hitches in the shipment of goods from the South to the North.
The Nigerian National Petroleum Company Limited also stated on Monday that if President Bola Tinubu had not stopped the subsidy on PMS in May, the company would have declared bankruptcy in June of this year.
According to attempts to modernise its refineries, NNPCL also declared that Nigeria will start exporting refined petroleum products by the following year.
Since many years, Nigeria has imported PMS and other refined petroleum products used throughout the nation through the NNPCL.
Following a meeting with the President at the Aso Rock Villa, Mele Kyari, the Group Chief Executive Officer of NNPCL, informed State House Correspondents that the gasoline subsidy had not been reimbursed.
“No subsidy in any kind. Our imported goods are paying for themselves entirely. We supply the market and comprehend the marketers’ inability to import. These are some of the interventions the administration is making, and we hope they do so swiftly. No subsidy exists, he said.
Kyari’s claim was made just 48 hours after the Nigerian Petroleum and Natural Gas Senior Staff Association announced the reinstatement of fuel subsidies.
Additionally, oil marketers had consistently claimed that fuel subsidies had returned, citing N720/litre as the landing cost of petrol as of last week. Depending on the location, the commodity is currently offered for between N580 and N617 per litre.
Festus Osifo, the national president of PENGASSAN, claimed that the government continued to subsidise petrol because of the price of crude oil on the world market and the currency rate.
“Today, they [the government] are paying subsidies. Since crude was selling for roughly $80 per barrel on the international market when the earlier price was set, there is actually subsidies today.
But as of right now, Brent crude is trading at roughly $93/94 per barrel. The price of [petroleum] therefore had to change because it had moved. The only time the price won’t change is when the exchange rate is well managed, supply is increased, and the exchange rate is lowered.
“As a result, we won’t be paying subsidies if the exchange rate falls today. But we have imposed subsidy because of the value of the exchange rate and the cost of crude oil on the global market, Osifo had said.
On May 29, 2023, Tinubu gave his first speech after taking the oath of office and said that the Federal Government was ending the subsidy period.
“With resources running out, subsidies can no longer support their rising expenditures.
Instead, we will reinvest the money in better public infrastructure, healthcare, education, and employment opportunities that will significantly enhance the lives of millions of people. The petrol subsidy has ended. Tinubu made a statement.
Fuel prices rose from N197 to between N480 and N570 in response to the President’s declaration. After then, the pump price was increased to N617/litre.
In a Monday press conference, the head of NNPCL said, “We have witnessed pockets of very low lineups in a very small number of states, not linked with the road situation.
“We are noticing an increase in the amount of roadblocks as goods are being transported from Southern depots to Northern regions of the nation, and it is taking considerably longer than it used to.
The trucks have to be rerouted around a lot of places in order to get there, which causes delays and some supply gaps. However, it has been fixed, so we no longer have these issues.
Kyari explained that market competitiveness had been brought about by the complete liberalisation of the downstream sector while maintaining that supply remained strong.
According to him, this tendency had resulted in negligible pricing differences between petrol stations, with customers automatically favouring retailers offering lower pump prices.
“You must have noticed that some petrol stations will lower their rates by two and three naira, causing customers to rush to the locations where you have the price cut.
“That causes panic because people who don’t understand why they’re acting in a certain way would assume something is wrong.
“The supply is strong. We have both marine and land products totaling more than 1.4 billion litres. Additionally, there are no problems with bringing those things onto the land. Therefore, there is no need for concern or dread, Kyari said.
The CEO of NNPC disclosed that the company was working with other oil marketers to resolve the FX issues.
He clarified, “We’re engaging them to resolve fundamental issues around access to foreign exchange along with other government entities.
“The government is exerting a lot of effort to guarantee the market’s access to foreign exchange. We are aware that the present I&E window will stabilise at about 770 thanks to the FX market.
Furthermore, we are aware that such inputs are already in motion. This country’s ambition is that the government’s current inputs would “crystallise” and reach “an equilibrium position in the FX market.”
On Monday, Kyari observed that if Tinubu hadn’t eliminated the subsidy on petrol, the NNPCL would have declared bankruptcy in June of this year.
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He further disclosed that due to subsidies on refined petroleum products, mainly PMS, roughly 25 licences intended for the development of refineries in Nigeria had remained vacant.
In addition, he predicted that thanks to deliberate, ongoing efforts to get the nation’s refineries up and operating, Nigeria will become a net exporter of refined petroleum products by 2024.
As a result of the currency crisis and their inability to import petrol into Nigeria, oil marketers expressed concern over the ongoing closure of petrol outlets nationwide.
According to Kyari, NNPCL spends more than N400 billion on PMS subsidies each month during the Energy and Labour Summit, which was held in Abuja and sponsored by the Petroleum and Natural Gas Senior Staff Association of Nigeria.
He said that Tinubu’s swift cancellation of the plan upon taking office on May 29, 2023, saved the oil company’s life.
Prior to Tinubu’s announcement on May 29, 2023, successive administrations had attempted to withdraw subsidies on petroleum goods, he said.
There have been various attempts to accomplish this in the past, spanning around 20 years, but they have all failed due to a lack of communication and false ideas that taking out subsidies will cause great suffering. And that historical conversation was incredibly challenging.
“The reality is that the existence of subsidies is the single factor that most inhibits growth in the downstream sector of the petroleum industry. Currently, there are about 25 licences to design, erect, and run refineries, but no one will move further.
No one will invest their money as long as there is uncertainty around pricing and who will pay the difference.
As long as the market did not set the price of petroleum goods, according to Kyari, individuals would always find ways to save money. He added that the subsidy should have ended in February 2022 in accordance with the Petroleum Industry Bill’s terms.
The National Assembly intervened, according to the head of NNPCL, and asked that the subsidy be continued till June 30, 2023.
Budgeting is one thing, but money is another else entirely. And I can confirm that not a single naira was paid to the NNPC Ltd as cost of subsidy from 2022, when the provision was established, until May 29, 2023. That indicates that we are fully financing it on NNPCL’s balance sheet.
“We withhold fiscal income, taxes, royalties, and profit, yet there is no way that even these fiscal duties would pay for the subsidy because we were seeing values reaching N400 billion in a month.
So, technically speaking, the NNPCL was on the verge of declaring bankruptcy due of a negative cash flow. By the end of June 2023, our cash flow would have been negative. Simply put, it means that the NNPC would have gone bankrupt if the President had not made that audacious choice, according to Kyari.
The head of NNPCL further observed that despite the lack of verifiable data on Nigerian petrol consumption, the elimination of PMS subsidy resulted in a more than 30% decrease in the amount of PMS evacuated from depots.
“Since the subsidy was removed, the evacuation from the depots decreased by 30%,” he said.
He added that this was yet another reason why the Federal Government and NNPCL were working to make compressed natural gas available as a PMS substitute, and that doing so would relieve some of the strain on petrol.
“CNG is a highly efficient, affordable, and clean fuel for vehicles. Because of this, NNPC Ltd. and the government are working extremely hard to expand access to CNG. The strain on PMS will decrease as a result, and the explanation is straightforward.
“Gas prices today don’t rise as quickly as PMS prices do. And as a result, on the market today, a litre of PMS will probably cost you N200 or N230. That implies that you can actually get petrol for around a third of what it costs in Abuja, where a litre costs N617′, Kyari said.
He said that Nigeria was on track to become a net exporter of refined petroleum products by 2024, but he emphasised that the price of those items would not fall significantly, as some had predicted.
The NNPCL helmsman further emphasised that the oil business was now the lone importer of fuel into the nation, since other marketers were refraining from introducing petrol owing to concerns about appraising foreign exchange.
He declared, “We are the only downstream organisation bringing PMS into the nation; marketers cannot do it at this time. That implies that we are able to control the market without introducing any subsidised environment. However, it is challenging for them to access foreign currency. Fx (forex) is accessible to us. We produce effects.
“As a result, although they have restricted access to forex, we do. You can see the N900 AGO (diesel) pricing since they have to set any price and hedge for the future in order to avoid losing money tomorrow.
Oil traders supported Kyari’s stance on currency restrictions because Benneth Korie, national president of the Nigerian Natural Oil and Gas Suppliers Association, claimed that marketers had ceased importing PMS.
“Filling station owners have a very tough time getting money to buy goods for their retail stores. Independent and large-scale marketers are both severely impacted.
As of right now, dealers are going out of business and many more are on the verge of bankruptcy as a result of their inability to acquire funding to fulfil orders for their stations. Filling stations are closing down in large numbers every day.
The number of filling stations that had closed was not known, according to Korie, but he emphasised that if the situation continues, “Nigerians will have money to buy petrol and will not see the product to buy in coming months.”
Festus Osifo, the president of PENGASSAN, stated during his statement at the summit that the recent policy orientation of the government had “put immense suffering on Nigerians.
“Chief among which is the removal of the PMS subsidy and the floating of the naira-dollar exchange rate.”
