Fuel: FG considers 3 options on N145/litre
importer of petrol, said last week that the landing cost of the commodity was N171 per litre but the retail price is still retained at N145 per litre.
The minister said: “We are looking at the option whereby NNPC will sell at N145 and private marketers will bring their products and sell at their own price. Whichever one, we will advise the government at the end of our work.”
He said the long term solution to the perennial scarcity of the commodity is the fixing of the country’s refineries and that the business model of Petroleum in the country needs to be changed in terms of importation and distribution.
The Presidential committee is to look for “how to cushion the effect of higher prices of Crude and lower prices of downstream. It is an 18 months plan before private refineries come into stream from 2019.
“What Nigeria needs is to have refineries working. Selling Crude at raw levels is not good for Nigeria. Dangote and modular refineries are in the pipeline from 2019 and onwards to solve fuel problems or reduce it drastically,” he said.
The GMD of the NNPC, Dr. Maikanti Baru in his speech said the scarcity of the fuel was as a result of a report in the media of impending increase in the pump price, PENGASSAN’s industrial action, panic buying, non-import by major marketers and smuggling due to price arbitrage.
In his opening remark, chairman of the committee, Senator Marafa said the investigative hearing would only focus on issues around the fuel scarcity and that all others would be looked into by relevant committees.
The Executive Secretary of the Major Oil Marketers Association of Nigeria (MOMAN), Obafemi Olawore, said the only way out of the perennial scarcity was deregulation.
“Going forward major players should be given major roles in the whole value chain. The way out is deregulation. Please let work towards deregulation so that the private sector can build refineries, “he said.
Raising issue on the N800bn being owed them, he said: “We were told that the request has been sent to you. Please whenever it gets to you, give it accelerated consideration.”
Also speaking, the chairman of the Depot and Petroleum Products Marketers Association of Nigeria(DAPPMA), Mr. Dapo Abiodun said to maintain the N145 approved pump price, government should make dollars available to them at N240.
“We have agreed that the cap price of N145 must be retained but we must look at the exchange rate. It is now up to the National Assembly to look at the way forward. We pay NPA in dollars and we go to the black market to but dollars to pay,” he said.
Chairman of the Board of Trustees of Independent Petroleum Marketers Association of Nigeria( IPMAN), Aminu Abdulkadir said the solution to the scarcity was adequate supply of the product.
The joint committee of the National Assembly on Petroleum (Downstream) has accused the NNPC and petroleum marketers of defrauding the country of N1.1tr in the importation of petrol.
Chairman of the Senate committee on Petroleum, Senator Kabir Marafa (APC, Zamfara) who chairs the session said the question was not about subsidy but that there is massive fraud in the sector.
“When we asked them (NNPC), they told us, that they are importing 30 cargoes of 37,000MT per month through the DSDP contract. If you compute it at 1341 per MT by 37,000, you will have 1.488b monthly.
“Assuming we consume 40m litres per day, we will have seven days left in each month and if you multiply it by 12 you will have supply of 84 days left,” he said.
For the marketers, he said, according to a document obtained from the CBN they got $3.3b dollars at subsidised rate of N305 exchange rate.
“The amount should serve us for 189 days at 40m litres per day. In 2017, they are supposed to import 4.2b litres which are equivalent supply of 107 days at 40m litres per day.
“If you take 107 days of the marketers and the excess of 84 days of NNPC that will give you supply of 191 days at 40m litres per day. In all, we had excess of 7.6b litres which is for 191 days. The cost of it at N141 per litre is about N1.1tr. Who is fooling who? Who is deceiving who? The issue is not about subsidy, there is massive fraud in the sector,” he said in a phone interview on the outcome of the session.
Based on a document obtained by Daily Trust, oil marketers collected a total of $3.075 billion from government to import fuel at the rate of N305 to a dollar between June 29, 2016 and August 21, 2017.
The document showed that the actual amount the marketers requested was $3.292bn, but they ended up getting a little less than that.
Similarly, the document indicated that the marketers also received the sum of $150.753 million and $51.49m respectively within the same period to import Automotive Gas Oil (AGO) and Aviation Turbine Kerosene (ATK).
Five major oil companies received the $51.49m for the ATK, the document showed.
While the requested amount for AGO was $221.523m, that of ATK was $62.538m.
The grand total amount collected for PMS, AGO and ATK by marketers as foreign exchange within the period was $3.278 billion.
There was a mild drama as Senator Marafa asked Kachikwu and Baru not to respond to questions raised on whether subsidy is being paid or not.
First to raise the question was Senator Bassy Albert Akpan (PDP, Akwa Ibom) when he queried the Petroleum stakeholders on how the N26 differential in the landing cost N171 and N145 approved price.
Marafa, interjected saying, “the essence of this meeting is not about whether there is subsidy or not. I don’t want us to go into the issue.”
The issue was also raised by Senator Philip Aduda (PDP, FCT) when he demanded for explanation on it, he says: “if we are paying subsidy let us know.” But again, Marafa quickly interjected saying that a new date would be fixed for the hearing on subsidy.
Recall that Marafa had during a press briefing ahead of the investigative hearing said among the issues to be discussed was subsidy.
Marafa had on Friday said: “Part of what we are going to ask is the issue of subsidy: We were told that there is subsidy, if there is, who approved it ? We are the only one that can appropriate money. If you do that without our approval, you have breached the Constitution of the country.”
At the hearing yesterday, Kachikwu and Baru disagreed on the number of trucks being diverted by marketers during the scarcity period.
Baru told the lawmakers that 4,501 trucks did not return to complete the Aquila process, saying “they are suspected to have been diverted.”
He said neighbouring countries are selling PMS at not less than N300 per litre, thereby encouraging smuggling of the product to those countries in order to make quick profits. “The price differential is a huge incentive to smugglers,” he said.
However, Kachikwu said: “it’s not possible that 4000 trucks left this country. The question is, was there diversion? Of course there was diversion. It’s more of internal diversion.”
He also said there must be sufficient crude for refineries, be they standard or modular, to operate optimally.
“If you set up all the modular refineries and there’s no crude supply, what happens? We’re looking at that. You must be an efficient refinery before you can attract crude.”
Kachikwu, in his opening remarks, used the opportunity on behalf of President Muhammadu Buhari to sympathize with Nigerians for the fuel scarcity experienced nationwide, which still persists in many states.
“All I can say is that lots of issues were on ground, amongst them is the fact that major marketers stopped importation because of the differential in landing cost.
“Also added to that, whenever you have issues like this at hand, people take advantage of the situation to divert. Some even diverted the commodity to outside the country. So, we had such issues at hand. There was also the issue of people selling above the approved price.
“But one other thing has to do with business model in terms of how we do business and all that. I want to inform Nigerians that we had over two years of free queues at the filling stations. That’s a lot of work.
Ultimately, what this country needs is to have our refineries work. For over 40 years, we can’t have our refineries work. That’s very unfortunate. Once we do the refineries, this matter will look behind us. When we do that, we’ll not have product shortages but we’ll be talking about surpluses.
At the end of the hearing, Marafa announced that the committee would invite NPA and NIMASA to come and explain why they charge in dollars when the commodity is purchased in naira.
Also to be invited are the Nigeria Customs Service (NCS), the Petroleum Equalization Fund (PEF) and the Petroleum Products Pricing Regulatory Agency (PPPRA). “Why people are getting the commodity very expensive is because charges are paid in dollars. We need to also invite Customs. NIMASA should also be invited to tell us why the charges should be paid in dollar. We should also invite PEF to tell us why they should continue to exist and why their money shouldn’t be used in things like rail,” he said.