The Nigerian National Petroleum Company Limited has stated that the local production of Premium Motor Spirit, also known as gasoline, by Dangote Refinery, Port Harcourt Refining Company, and other companies in the country will not affect the product’s pump price.
Mele Kyari, group chief executive officer of the NNPCL, made this disclosure during an interview with Arise television in Abuja on Thursday. He made it clear that the idea that gasoline prices would fall once the nation began domestic production was untrue.
Kyari stated that the Dangote Refinery, which previous President Muhammadu Buhari dedicated on May 22, 2023, will begin producing goods by the end of July or the beginning of August.
But Kyari asserted that even if these facilities were projected to produce a large amount of gasoline, the price of the goods would not go down simply because it was made 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
In a separate interview with Channels TV, the NNPCL CEO discussed when the nationwide gasoline lines will clear, predicting that they wouldn’t last through 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 liters 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 confirmed that the PMS price sheet for multiple states that was popular on the internet on Wednesday was actually 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.
He responded, “Today I have 1.8 billion litres of PMS and that implies that if we don’t do anything, I’ll have enough gasoline in my hands for the next 30 days.
According to Kyari, the corporation had approximately 800 million liters of gasoline on land that was kept in filling stations, tank farms, and depots, with a total supply of about 1.8 billion liters for both maritime and land use.
“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’
On Thursday, after meeting with Senator Abdullahi Adamu, the National Chairman of the All Progressives Congress, at the party secretariat in Abuja, Kyari revealed that the Bola Tinubu administration had reached an agreement to have one of the four refineries repaired and operating at peak efficiency by the end of the year.
The CEO of NNPCL contended that given the significant opportunity cost the Federal Government was incurring by sponsoring it, it was no longer justifiable to continue subsidizing the good.
At around 12.30 p.m., Kyari was welcomed by the APC chairman and members of the National Working Committee. He admitted that the nation could no longer support the pricey subsidy regime.
According to him, Lagos, Abuja, Kano, and Rivers utilized more than 38% of the nation’s total petroleum distribution.
According to Kyari, the president was developing some palliative measures to ameliorate Nigerians’ suffering in the wake of the pump price increase and its impact on commercial fare.
In order to ensure that one of the refineries was ready this year, he further stated that a process of restoration was ongoing.
Kyari bemoaned the fact that the Federal Government had not yet released cash for 2022 despite its N2.8tn debt to the NNPCL.
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 recognized that the price hike would cause inflation, but said that what transpired next will be decided by market forces.
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.
“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 liters in an SUV, you are literally subsidizing three liters 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.’’
According to Kyari, the price at which gasoline is now being sold reflects the commodity’s present market value.
‘’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 most recent development, the head of NNPCL predicted that the market would self-regulate, adding that oil marketing companies may either import goods or purchase locally manufactured ones to market and sell at market rates.
“You would see competition even with NNPCL,” he continued, “and going forward, the company cannot do more than 30% of the market.” As a result, there will undoubtedly be competition, and the market will undoubtedly control prices. It is an instantaneous pricing, and you will notice the change that is taking place in many jurisdictions in two weeks.
‘’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.’’
The Federal Government has been urged by the House of Representatives to stop providing subsidies for all petroleum products, not only gasoline.
To counteract the consequences of the elimination of the PMS subsidy on Nigerians, the House encouraged the government to implement palliatives and other measures.
The House Ad Hoc Committee on the Need to Investigate the Petroleum Products Subsidy Regime in Nigeria made these recommendations, which the MPs discussed as a Committee of the Whole and adopted in plenary on Thursday.
Eleven months after the work was given to the panel, the report had been laid by the committee’s chairman, Ibrahim Aliyu.
According to the committee, “the Federal Government should remove subsidies on all petroleum products.”
In order to facilitate the movement of large numbers of people around the nation, the panel also recommended that the government establish multimodal, regional, and national transportation systems.
In order to prevent Nigerians from being taken advantage of through profiteering, the committee also suggested that the Nigerian Midstream and Downstream Petroleum Regulatory Commission draft tighter and more suitable regulations in accordance with the Petroleum Industry Act.
A reconciliation conference between the NNPCL, Federal Inland Revenue Service, Joint Venture Contracts, and the NMDPRC regarding the utilization of their crude entitlements should be facilitated by the Revenue Mobilization Allocation Committee, according to the MPs.
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;
