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By Adewale Sanyaolu
The withdrawal of oil marketing companies’ (OMC) from Premium Motor Spirit (PMS) import, in the fourth quarter of 2017, no doubt created bottlenecks in the downstream petroleum sector, leading to acute shortage of petrol across the country as at then
For months, fuel queues dotted most part of the country, which further compounded the country’s energy crisis as electricity was also in short supply.
Most SMEs and homes, which depended on petrol for their daily survival, were at the receiving end of the energy crisis.
The oil marketers had hinged their suspension from petrol imports to the inability to source forex at the official exchange rate, fluctuation in exchange rates, low margins of petrol as the landing cost and selling price was no longer profitable for its operations.
Their withdrawal, however, left the Nigerian National Petroleum Corporation (NNPC) as it was then known as the importer of last resort.
To ensure energy security for the country, the NNPC took up the responsibility of being the sole importer of petrol into the country in a bid to keep the country wet.
Prior to the suspension of petrol imports by oil marketers, the debate on whether the government should continue to fuel subsidy had always being on the front burner, thus generating diverse opinions from stakeholders, Civil Society Organisations (CSOs) and labour.
While some, especially the private sector operators, have canvassed the total removal of subsidy, labour on its part have consistently moved against the decision, saying such will further impoverish Nigerians and slide them further below the poverty line.
The Petroleum Industry Act (PIA) recommended the removal of subsidy, paving way for the full deregulation of the downstream petroleum sector where prices are determined by market forces.
Government in taking a stand, having considered the security implication that the removal of subsidy will cause, maintained that the global economy was still fragile as a result of the COVID-19 pandemic which brought global economies to its knees.
It argued further that the timing was not yet right for subsidy removal, especially in 2022, and thus shift the implementation of PIA to June 2023 by which time it would have consulted with all relevant stakeholders, including communicating properly with Nigerians, especially those in the middle to lower economy class.
NNPC Efforts
With a daily fuel supply of 68 million litres, the funding of petrol imports solely by NNPC is a huge financial burden on its books.
While there are arguments about the exact daily consumption figure for petrol, the NNPC Limited at the weekend laid the matter to rest, insisting that the figure remained at 68 million litres per day and has offered to submit itself to forensic audit of fuel supply and subsidy management.
It acknowledged the possibilities of criminal activities in the PMS supply and distribution value chain, pledging: “As a responsible business entity, NNPC will continue to engage and work with relevant agencies of the government to curtail smuggling of PMS and contain any other criminal activities.” The company also pledged to deliver on the mandate of ensuring “energy security for our country with integrity and transparency.”
NNPC Limited further explained that without subsidy, petrol would be sold at N462 per litre as against the current pump price of N179 per litre.
NNPC Limited equally noted the average Q2, 2022 international market determined landing cost was $1,283/MT and the approved marketing and distribution cost of N46/litre.
According to the company, the combination of these cost elements translates to retail pump price of N462/litre, an average subsidy of N297/litre and an annual estimate of N6.5 trillion on the assumption of 60 million litres daily PMS supply. This, it said, will continuously be adjusted by market and demand realities. The company explained further that between January and August 2022, the total volume of Premium Motor Spirit (PMS) imported into the country was 16.46 billion litres, which translates to an average supply of 68 million litres per day.
Similarly, import in the year 2021 was 22.35 billion litres, which translated to an average supply of 61 million litres per day.
“The NNPC Limited notes the average daily evacuation (Depot truck out) from January to August 2022 stands at 67million litres per day as reported by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). Daily Evacuation (Depot load outs) records of the NMDPRA do carry daily oscillation ranging from as low as 4 million litres to as high as 100 million litres per day’’
Nigerians paying 30 per cent of petrol cost
The Group Managing Director of Rainoil Limited, Mr Gabriel Ogbechie, recently said that the price of petrol in Nigeria (N179/litre) is well below the global average of N586.66 per litre,
The assertion of Ogbechie further lays credence to the position of NNPC Limited that without petrol subsidy, petrol will sell for N462 per litre. Ogbechie stated this in his presentation at the National Association of Energy Correspondents (NAEC) annual conference titled “Energy Transition: The PIA and Petroleum Pricing, Way forward for the Downstream Industry” which held recently in Lagos.
The Rainoil boss disclosed that Nigerians are currently paying 30 per cent of petrol price, warning that the cost of subsidising a single product is no longer sustainable.
He lamented that N1.55 trillion was spent on fuel subsidy between January and June 2022 (39 per cent of the N4 trillion 2022 fuel subsidy budget).
The downstream investor maintained that the country stands to save over N12 trillion, which could be channelled to other areas of development for the country if the downstream sector is fully deregulated
He called on government to not only deregulate but also initiate a petrol tax to fund maintenance and construction of critical infrastructure across the country
Speaking on the vexed conversation around fuel subsidy removal, he noted that Nigerians are not adverse to subsidy removal, but noted that petrol consumers only want some level of reassurance on the subject matter, and the cushioning effects by government.
Ending petrol imports
As part of its efforts to ensure energy security for the country, NNPC Limited, last week assured Nigerians that that the country will stop importing Premium Motor Spirit (PMS), popularly called petrol by end of June 2023.
NNPCL Group Chief Executive Officer (GCEO), Mr Mele Kyari, gave the assurance at the 49th session of the State House Briefing held in Aso Rock, Abuja.
Kyari maintained that upon completion of the rehabilitation of the refineries located in Port Harcourt (1 and 2) Kaduna and Warri operating at 90 per cent installed capacity, Nigeria would only be able to raise 18 million litres of petrol.
Data obtained from the NNPC monthly report shows that Nigeria consumed 72.07 million litres of petrol per day in the month of May, from 55.59 million litres in April.
He explained that the ownership of 20 per cent equity by NNPC in the Dangote refinery gives it access to 20 per cent of the production from the plant as part of its equity which will in turn help the country to bridge the import gap.
Kyari said he is very much aware of the progress of work at the Dangote refinery because the NNPC is on the board and certain that the project will be delivered by middle of next year, saying though projection is around first quarter of next year.
He said being a modern refinery, the Dangote refinery has the ability to crack more gasoline than a typical refinery and capable of producing about 50 million litres of petrol per day.
According to him, the combination of the NNPC refineries when back on stream coupled with other initiatives around modular refineries and the Dangote refinery will completely eliminate any importation of petroleum product into the country next year. With all these, he said the country would be a hub for export of petroleum products not just within the West Africa sub-region but to the rest of the world.
‘‘So we need to get it clearly that if all the four refineries are working today, we will still have a net deficit of petrol to import into the country. This is what it means; because our population, demand and middle class has grown with people having more than one car. As such the volume of petrol required in the country has grown almost exponentially. Apart from the 20 per cent equity, he said NNPC has the first right of refusal to supply crude oil to the refinery, saying NNPC saw the energy transition challenge coming which means there would be a time that nobody will be available to buy the oil.
“It is in this vision that we locked down the ability to sell crude oil for 33,000 barrels minimum by right for the next 20 years.”
