Kachikwu: Petrol Pricing Template Not Inflated, Explains Sales of Forex by IOCs

  •   Says fuel importation to end 2019  

Damilola Oyedele in Abuja

The Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, has said the petroleum pricing template being used by the Department of Petroleum Resources (DPR) to fix the price of the product at a maximum of N145 per liter, is not inflated.

This is as the House of Representatives Committee on the Review of Pump Price of Petrol insisted that there were several unnecessary charges in the template particularly those related to transportation, which when removed, can reduce the pump price of the product.

At the continuation of the hearing yesterday, the minister said 71 percent of the N145 is for product, and the foreign exchange rates.

“Where the problem is on foreign exchange rate of conversion, there are two key elements in the template, one is how much do you buy it and how much is the foreign exchange conversion,” he said.

The minister added that the price of crude oil is internationally fixed, while the cost of foreign exchange is a monetary policy issue.

 Speaking on the removal of subsidy on petroleum products, Kachikwu it is affected by policy and foreign exchange changes.

“Subsidy may well drift back because subsidy removal was in a specific exchange rate, specific policy index as at the time it was done, and we did not remove it. What we need to do today because of the movement of the foreign exchange application,  is to begin to say: can we be more efficient in templating to be able to cover the gap that we see emerging? Two, is there something that we can do in the interim on the foreign exchange conversion aspect to keep the prices from jumping above the 145.

“…and we are working on those, I am sure we will come up with something very quickly,” the minister said.

At the hearing, Kachikwu and the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, also explained that the International Oil Companies (IOCs) have been selling foreign exchange to major oil marketers, as their demands cannot be met by the apex bank.

The minister said it was an ‘intervention scheme’ to reduce the scarcity being experienced by the major oil marketers, who source about 40 per cent of their forex from the CBN.

The scheme, he said,  was establishedafter an inter-agency  team was formed comprising  the Nigerian National Petroleum Corporation (NNPC), CBN, Petroleum Products Prices Regulatory Agency (PPPRA), and certain criteria were set.

The beneficiaries were screened using the criteria, Kachikwu explained. Emefiele, who was represented by the Deputy Director of the CBN, Dr. Sarah Alade,backed the minister’s submission.

“There is shortage of foreign exchange. In 2013 to 2014, federal government used to get $2 billion to $3 billion monthly and the CBN in the interbank, sells about 30 per cent of that. 70 per cent come from the foreign investors.”

“Today, we get $600 million, $700 million. Nothing comes in from interbank. $1. 5 million is sold everyday and $1 billion was done in December to clear matured letters of credit,” Emefiele told the committee, adding that things are not they way they used to be.

Speaking further, Kachikwu said Nigeria would be able to stop importing refined products by the year 2019, as the government has been able to attract investors to partner the NNPC to initiate a model that would see to the repair of the country’s refineries within two years.

Already in the last two years, the government revived the refineries to produce eight million out of the 20 million required daily for national consumption, the minister added.

“This has consistently served as a target for this government so that by  December 2018 NNPC must be able to deliver on some of the terms given them, one of which is to reduce petroleum importation by 60 per cent. By 2019, we should be able to exit completely the importation of petroleum products in this country, and subsequently boosted by the fact that Dangote obviously is building one. So we expect to have an excellent situation then,” he said.