The management of the Nigerian National Petroleum Corporation (NNPC) recently came under fire by the legislators and others, over what it called under recovery after fixing a prize of N145 per litre despite a higher landing cost, FESTUS OKOROMADU reports.
The Nigerian National Petroleum Corporation (NNPC), has continued to be in the news in recent times for what one may be tempted to describe as the wrong reasons. The situation is even more dangerous considering the fact that the arrays of missiles being fired against the Corporation are coming from the government and its agencies.
First it was the state governors contending with NNPC over the issue of remittances to the federal account. Before Nigerians could try to decipher what was going on, a new scenario emerged. This time around the corporation was said to be illegally funding the smooth provision of Premium Motor Spirit (PMS) popularly known as petrol across the country.
While it is no longer news that the Nigeria’s refineries are not functioning optimally due to numerous reasons, the corporation is left with no option but to import petroleum products. Unfortunately, due to a number of micro economic policies of the government like deregulation and foreign exchange, the importation of petrol has since September 2017 become the sole responsibility of NNPC. The situation is further compounded by the rising price of crude oil in the international market.
The State Of Local Refineries
One of the greatest irony of Nigeria as an oil producer is the fact that it is unable to refine its crude oil despite having built four refineries over the years.
According to NNPC Monthly Financial and Operations Report May 2018, the three refineries currently under its management produced 214,328 metrics tons (MT) of finished Petroleum Products during the month. The report stated that the performance translate to 20.12 per cent capacity utilisation of the refiner.
The report further revealed that 1.19billion litres of PMS were supplied by NNPC during same month translating to 40.59mn litres/day, stressing that the move was to sustain seamless distribution of petroleum products and zero fuel queue across the nation.
Rising Price Of Crude
The implications of this effect to ensure availability of petroleum products especially petrol has become a national burden that is depriving Nigeria from benefitting from the much celebrated rising price of crude oil.
Director- general, Budget Office, Mr. Ben Akabueze, revealed recently while speaking at the Strategic Dialogue on the Morocco-Nigeria Relations in Abuja.
According to him, the country has not benefited from the current global rise in the price of crude oil due to this situation and noted that the NNPC choose to use the term, “under recovery.”
Expatiating on how the country was losing out of the gains being recorded by other crude oil producers, the DG said, “This ought to be a season where we should be clicking glasses with regards to the oil price. But right now, practically every drop of refined petroleum product that we consume in the country is imported.”
On how the nation got into this messy situation, Akabueze said, “The one single factor that determines the price of refined product is the price of crude. In essence, while we export the crude at about $80 (per barrel), we effectively import back the same crude at about $100 importation price for refined products. And that explains why despite the strong oil prices, we are not seeing a corresponding growth in government revenue.’’
Implications Of The Figures
According to the DG, NNPC pays N53 on every litre imported into the country. He further added value by saying that the industry regulator, the Department of Petroleum Resources (DPR) puts the estimated volume of petrol consumed daily at 45 million litres.
His words, “At the moment, in terms of pricing of petroleum products, for every litre of petrol, there is a N53 under-recovery. Well, that is the term that the NNPC, which has this responsibility, calls it and so who am I? This represents a significant value for us. Hence, the need to diversify the economy remains urgent.”
Analysing the figures emanating from Akabueze financial experts said the nation may have spent about N8.729 trillion ($2.42 billion) in the past one year subsidising or under recovery of the petrol.
The amount is N117 billion ($8.7 million) higher than the country’s total budget for 2018 which is estimated to be N8.612 trillion ($2.39 billion).
Propelled by the various claims of subsidies on petrol, the Nigerian senate recently set-up an ad hoc committee to investigate the issue. The group managing director of NNPC, Dr. Maikanti Baru, while testifying before the committee disclosed that the corporation was using received dividend payout from Nigeria Liquefied Natural Gas (NLNG) for financing petrol under recovery.
According to him, the sum of $1.05 billion was involved in the transaction. The said amount is reported to have been paid to NNPC during the fuel scarcity crisis that lasted between December 2017 and January 2018.
While the issues as to the legality of the use of the fund continue to linger on leading to another investigation committee being constituted by the senate, there are reports that the National Economic Council (NEC) and the Federation Allocation Accounts Committee (FAAC) approved the move.
reports that a member of FAAC, who chose not to be named, said Baru, briefed the council and the committee before the fund was used.
The publication also quoted a source in the Central Bank of Nigeria (CBN) to have confirmed to it that NNPC obtained $1.05 billion as a revolving loan, to pay for subsidy in 2018.
The source stated that Section 7 of the NNPC Act empowers the corporation to defray costs from its revenue,adding that the NNPC had fully complied and had implemented the approved Treasury Single Account (TSA) laws in utilising the money, which is domiciled in the apex bank’s account.
According to the source, the fund is managed by inter-governmental agencies including the ministry of petroleum resources, ministry of finance, the department of petroleum resources, and the petroleum equalisation fund.
He said it was “unfortunate” for anybody to accuse the NNPC of misappropriating the fund.
Controversy Over Under Recovery
Meanwhile the controversy over how much is actually being paid as subsidy or under recovery did not just began now and it is not likely going to fade away soon. No thanks to differences in figures being thrown around.
For instance, earlier in the year, the NNPC GMD had disclosed that the corporation was incurring an under-recovery of N774 million every day.
Baru stated this when he led a team of the corporation’s management on a visit to the comptroller- general of the Nigerian Customs Service, Col. Hameed Ali (Retd).
He attributed the situation to the activities of fuel smuggling syndicates and growing presence of the frontier stations across the nation’s border towns.
On his part, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, told reporters the country records about N1.4 trillion yearly as under-recovery from its importation and sale of petrol at the government regulated pump price of N145 per litre.
Kachikwu, who disclosed this to journalists on the sideline of a meeting of stakeholders in Nigeria Liquefied Petroleum Gas (LPG) sector in Abuja in April later said he was misquoted.
Nigerians Expresses Displeasure
Eminent Nigerians have continued to blame the government for the crisis in the nation’s downstream sector. One of such is the Emir of Kano, Muhammadu Sanusi II, who called for the scrabbling of the subsidy on petrol.
The monarch who spoke at the 9th convocation ceremony of Nile University in Abuja, proffered solutions saying, “Let us invest more in education and let us give up some of the privileges that we have, such as the trillions we are spending subsiding petroleum products. That money should go into educating our young people.
“We are spending too much money on roads and bridges and trains and too little money on educating our children. Let us educate these young people and they will build the roads, trains and the bridges. We do not need to invite the Chinese to do that for us,” he said.
Similarly, chairman, Major Oil Marketers Association of Nigeria ( MOMAN), Mr. Andrew Gbodume, expressed concern over the sustainability of the subsidy or under recovery payment.
In a statement issued by association, it said while appreciating the Petroleum Products Marketing Company (PPMC) , a subsidiary of the NNPC for ensuring consistent supply of petroleum products, it is however observed that with the NNPC being the sole importer and supplier of petroleum products in the country at the cost incurred, it is clear to all Nigerians that this policy direction is not sustainable.
Proffering solutions, Gbodume, who is also the managing director of MRS Oil Nigeria Plc, said, “We believe the path to fully achieving a sustainable operating environment for the Nigerian petroleum industry begins with the downstream private sector. We feel the time is now to encourage a well informed and honest debate amongst ourselves as Nigerians on our downstream pricing policy, showing sensitivity to the fears of Nigerians and the challenges we face as a people and as an economy, to arrive at an equitable but sustainable business model.”
On his part, the presidential candidate of the Young Progressives Party (YPP), Professor Kingsley Moghalu, described NNPC’s diversion of the dividend from NLNG for payment of subsidy as illegal.
A statement issued by his spokesman Jide Akintunde, said, “By law, dividends from the nation’s 49 per cent equity stake in NLNG should be paid into the Consolidated Revenue Fund of the Federation where the money would be shared by the three tiers of government.
‘’The federal government is also required by law to secure budgetary approval from the national assembly to fund its fiscal commitments, including petrol subsidy.”
On the way forward, he said, “As president, I plan to deregulate the downstream petroleum sector, and partially privatise the NNPC to make it a transparent corporation.”
He equally advocated for the privatisation of NNPC, among others. “The oil-producing communities will have a significant ownership stake in the shares of NNPC, when privatised, in line with my vision for constitutional restructuring of the country and fiscal federalism, where all Nigerian regions will own the natural resources in their area and pay tax to the federal government,” the statement quoted him as saying.
Some experts have continued to call on the national assembly and the presidency to fast track the enactment of the Petroleum Industry Governance Bill (PIGB) alongside other components of the Petroleum Industry Bill(PIB) to save the nation the loss of funds and embarrassments.
Experts, recently called on the Federal Government to urgently revamp the nation’s refineries and create an enabling environment for private investment in refineries to curb the rising importation of petroleum products.
The experts spoke in Lagos against the backdrop of the report on Petroleum Products Importation Statistics for the second quarter of 2018 recently released by the National Bureau of Statistics (NBS).
Kareem Jubril, Head, Energy Desk, Ecobank Nigeria, said the Federal Government should privatise the refineries since past maintenance and overhauling of the refineries had not had significant effect.
NAN reports that the NBS report said 4.79 billion litres of premium motor spirits (PMS) and 1.11 billion litres of automotive gas oil (AGO) were imported during the quarter under review.
The nation also imported 43.79 million litres of household kerosene (HHK) and 200.39 million litres of aviation turbine kerosene (ATK).
The report said the highest volume PMS put at 1.78 billion litres was imported in April, while the highest volume of AGO and HHK were imported in June.
On the other hand, petroleum products importation statistics in the first quarter of 2018 showed that 5.67 billion litres of PMS, 954.47 million litres of AGO, 66.914 million litres of HHK and 5122.067 million litres of ATK were imported.
According to Jubril, the volume of imported petroleum products and the amount the country spends importing them will continue to increase because as the economy grows, so will its demand for energy.
“And with higher demand for energy, means higher import for a country that does not produce enough refined products,” he said.
The energy expert said the high import volumes of petroleum products had made it imperative for the federal government to either revamp the existing refineries or provide the enabling environment for private sector participation.
Jubril, however, said the funds required to overhaul all the refineries could actually be used to build a modern refinery that would serve the needs of the country.
“I know that there is a lot of political hindrance to disposing all those refineries, but I do not see the reason why the government should continue to hold onto them.
“They are actually cash cows that continue to drain government’s resources, and we have not really seen the output match the expenditure spent on them.
“We could privatise them, concession them, sell them off totally or government could hold a non-controlling share in them.
“They are different methods that we could explore to make sure that the assets do not go to waste as is the case presently,” he said.
Mr. Muda Yusuf, Director-General, Lagos Chamber of Commerce and Industry (LCCI), said the solution to reduce the country’s petroleum import was to have the nation’s refineries functioning.
Yusuf, however, said the government should relinquish the control of the refineries to the private sector to ensure optimum performance and efficiency.
The LCCI boss also called for total liberalisation of the petroleum sector, and that the present price control mechanism had hindered the growth of the sector and shut out private investors.
“The current arrangement is bleeding the economy. FAAC meeting cannot hold for months because of all the controversy of oil revenue,” he said.
Yusuf also said the speedy passage of the Petroleum Industry Bill (PIB) would boost the growth of the sector.
Ranking Ex-Govs Move To Take Over Senate Presidency
JUST-IN: I’m Not In Coma, My Driver Not Dead – el-Rufai
INEC Takes Final Decision On Rivers, Bauchi Today
Why Atiku Cannot Inspect Election Materials Now – INEC
JUST-IN: Senate Okays N30,000 Minimum Wage
NEWS19 hours ago
INEC Takes Final Decision On Rivers, Bauchi Today
NEWS6 hours ago
el-Rufai Ends Accident Rumour, Arrives Nnamdi Azikiwe Airport,Abuja
NEWS16 hours ago
Emir Of Patigi Is Dead
NEWS13 hours ago
Bauchi: INEC Challenges Court Order Stopping Collation Of Results
COVER STORIES21 hours ago
Prepare For 50% VAT Increase, FIRS Tells Nigerians
NEWS8 hours ago
Minimum Wage: Workers Call For Speedy Implementation
NEWS5 hours ago
Court To Determine Adamawa Supplementary Poll Thursday – INEC
NEWS11 hours ago
Minister Denies Working For PDP