Petroleum products marketers have asked the federal government not to compromise the Petroleum Industry Act (PIA) by postponing downstream oil sub-sector deregulation and at the same time complaining of rising petrol subsidy payment.
They argued that the haste by President Muhammadu Buhari in endorsing the bill and delaying its actual implementation on one hand and crying loud over huge subsidy payment, is on its own very unclear in terms of transparency.
The president, Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Dr. Prince Billy Harry, advocated for immediate abrogation of the subsidy regime as it is no longer sustainable and equally outlawed by the PIA.
Reacting to LEADERSHIP enquiries about rumoured pump price review and rising subsidy payment, he said government has no better explanation on the issue and the only thing required of government is to develop a proper economic strategy to drive some other initiatives that comes with impactful remedies.
“Government has provided alternatives to petrol with policy switch to Compressed Natural Gas (CNG) to power the transportation sector and its proper take off requires money to put infrastructure in place. Let us plough the subsidy money to this area and cushion whatever effect any adjustment in pump price of petrol will produce.
“Part of it if also deployed to the agriculture sector and other critical sectors of the economy will drive down anticipated inflation rate,” Harry argued. He said continued payment of subsidy will erode economic gain of the present administration.
LEADERSHIP reports that data from the Nigerian National Petroleum Corporation (NNPC), shows that the federal government paid a total of N25.37 billion in January.
The report showed that subsidy or under-recovery costs borne by the NNPC amounted to N60.40 billion in February; N111.97 billion in March; N126.30 billion in April; N114.34 billion in May; N143.29 billion in June and rose to N175.32 billion in July.
The NNPC attributed rise in cross border product smuggling to prevailing low price of the product in the country. The NNPC, also complained that smuggling of petroleum products has increased volume of products demand and attributed existing arbitrage fuelled by the prevailing huge price differentials in pump price of petrol in Nigeria and neighbouring countries to smuggling.
In a presentation at an interactive session by the Joint Senate Committee on the 2022-2024 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP), group managing director of the NNPC, Mallam Mele Kyari, said with a price difference of over N100 per litre between what is sold in Nigeria and in countries around the nation, it was difficult to block the activities of petrol smugglers.
The NNPC GMD said though the corporation, working in concert with other agencies, has made noticeable progress in combating the menace, the battle was yet to be won. “As long as there is arbitrage between the price that you sell and what is obtainable elsewhere, you can be sure that it is very difficult to contain the situation.,” he said.
The GMD emphasised that the activities of smugglers have also made it difficult for the country to determine the actual consumption figures for petrol, noting that the Corporation can only know what was trucked out from loading depots across the country but cannot determine how much of that was consumed in-country.
On the MTEF assumptions, the GMD reiterated a base oil price scenario of $57 per barrel for 2022, $61 per barrel for 2023 and $62 per barrel for 2024 predicated on a base national production of 1.883 million barrels per day in 2022, 2.234 million barrels per day in 2023 and 2.218 million barrels per day in 2024.
Harry, however, said that on real economic considerations government appear not be heading in the right direction by sustaining the subsidy regime and all argument of smuggling can be addressed by way of deregulation.
According to him, government should initiate a workable economic tool to control inflation by ploughing the huge sums of money it deploys to subsidy for a single product to escalate its gas transition strategy.
“Government should facilitate use of Liquified Petroleum Gas, LPG and Compressed Natural Gas, CNG, in powering the transportation industry and food price control so as not to put pressure on the population following whatever outcome of price of petrol will be” he said.
“We completely call for abrogation of the petrol subsidy and immediate implementation of the Petroleum Industry Act, PIA. We cannot have a law we have been aspiring for several years and continue to go back and forth with price adjustments”. he told LEADERSHIP in a conversation.
Our Correspondent reports that PETROAN has also entered into partnership with THLD Group for the use of its retail outlets as vehicle conversion (petrol to gas) centers.
Harry said the initiative was the push needed to boost the National Gas Expansion Program (NGEP), adding that the autogas initiative of the federal government came at the right time, especially in light of global crude oil fluctuations coupled with the deregulation of the local petrol market.
He added that the use of autogas will not only cushion the effect of downstream deregulation but also create new markets and enormous job opportunities for our people.
Also, the National President of the Independent Petroleum Marketers Association of Nigeria, IPMAN, Elder Chinedu Okoronkwo, said the subsidy regime as well as lack of political will to deregulate the sector has denied the sector of huge investment potentials.
According to Okoronkwo, “The current price control regime is impacting marketers margin and that many have been forced out of business because they cannot repay facilities offered them by banks.
“I heard from the Minister that subsidy arrangement had been made up to 2022 and we have the belief that before then several other Modular Refineries, Dangote and NNPC rehabilitation efforts would have matured and these will guarantee products supply” Okoronkwo said.
LEADERSHIP reports that about N621.55 billion was deducted from the Federation Accounts Allocation Committee, FAAC, funds by the Nigerian National Petroleum Corporation, NNPC, as petrol subsidy in the first half of 2021.
The figure for subsidy amounted to about 43.97 per cent of the N1.413 trillion gross revenue from the sale of Nigeria’s oil and gas by the Agency.
From information provided by the NNPC to FAAC, the subsidy stated as ‘value shortfall’ indicated that N25.37 billion petrol subsidy was deducted from its contribution to Federation Accounts in January, 2021.
This showed a steady month-on-month rise in petrol subsidy cost, showing that petrol subsidy for the month of February was N73.13 billion while N111.97 billion was recorded in March.
April subsidy deduction amounted to N126.30 billion, May was N114.34 billion while the June figure was N170.44 billion.
The Minister has equally expressed worry about the country’s daily petrol consumption, which stood at 102 million litres per day in the month of May.
He called for synergy between the Nigerian National Petroleum Corporation (NNPC), Petroleum Equalisation Fund (PEF), Petroleum Product Pricing Regulatory Agency (PPPRA), the Economic and Financial Crimes Commission (EFCC) and other security agencies, to curb smuggling.
Kyari, said the current situation had kept the country in a state of bleeding, as it could not sustain the payment of subsidy that accompanies the volume put at over 100 million litres.
According to Kyari, with the high volume of daily consumption, the country cannot sustain subsidy payment adding “as long as we don’t regulate volume until we are able to exit this current level, which I know so much work is going on, then we have to manage the volume that we are exposed to between this price of N162 and N256”.
“The difference comes back to as much as N140 billion to N150 billion cost to the country monthly. As long as the volume goes up, that money continues to increase and we have two sets of stress to face, the stress of supply and stress of foreign exchange for the NNPC. We may not see foreign exchange cheque taking place for importation,’’ he said.
Okoronkwo, however, said a new initiative by government to locate petrol stations at border areas with her neighbours would go a long way to eliminate smuggling. “I consider this as a good way to go because when you have neighbours who critically need a product you have in abundance and you don’t provide them with opportunities they will continue to devise alternative means to get it for their survival so making it available to them officially will help to end the stealing “.