Kachikwu Puts Under-recovery on Petrol Imports at N1.4tn


Chineme Okafor in Abuja

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, Thursday put the under-recovery, a euphemism for subsidy, arising from the importation and sale of petrol at the government regulated price of N145 per litre at N1.4 trillion per annum.

Speaking at a meeting in Abuja where operators in Nigeria’s Liquefied Petroleum Gas (LPG) sub-sector met to review the challenges of the LPG market and find ways to mainstream it into the country’s fuel market, Kachikwu explained that it was time Nigeria began to look at alternative fuel sources like LPG which are clean and less expensive for the country.

He also stated that President Muhammadu Buhari would in the next two months launch an infrastructure rebirth plan, which the country would leverage to attract private funding to upgrade her oil and gas infrastructure.

“Clean energy is very essential and we need to move away from complete utilisation in our transport sector of only petrol which is creating a lot of under-recovery of N1.4 trillion per annum as the government’s exposure.

“At the end of the day, we will begin to go into other components of cleaner fuels and rely less on petrol that is gotten from out of the country,” he said.

When asked to clarify if the figure on under-recovery for petrol was annual and how the federal government was going to address the funding gap, the minister said: “Yes, that is per annum and that is being addressed at a very high level. But I don’t want to go into that.”

In March, the Nigerian National Petroleum Corporation (NNPC) disclosed that its current expenditure on petrol subsidy was N774 million per day, adding that 50 million litres of petrol was consumed in the country everyday.

NNPC’s Group Managing Director, Dr. Maikanti Baru, described the amount as “under-recovery”, blaming the humongous subsidy element on the proliferation of fuel stations in communities with international land and coastal borders across the country, inferring that a large portion of the 50 million litres is smuggled across borders to neighbouring countries where petrol prices are higher.

Kachikwu also indicated that the government would launch an infrastructure rebirth plan for the oil and gas industry. The rebirth plan, he noted, would enable the private sector to invest in key infrastructure assets across the entire value chain of the oil and gas sector.

“I think government is focused on all the areas. We are hoping to launch an infrastructure rebirth map for the oil sector over the next two months, and I hope the president will launch that.

“The effect is that it will be to open up tariffs and create policy positions that will enable people to actually go in and invest in critical infrastructure that is needed because anywhere you go, whether it is distribution of petroleum products massively through trucks and rather than through pipelines, whether it is being able to take crude to the refineries or distribute gas throughout the country, infrastructure is so key.

“There is a lot of stranded gas and power everywhere, so distribution is key, infrastructure is key. We need to find a way of finding enough incentives to enable the private sector go in very bullishly and put the money where it is supposed to be,” he explained.

On the significance of the LPG meeting, he said: “Coming from this meetings we are having, we will come up with recommendations of what DPR needs to do to deepen licensing issues and enforcement issues, but over and above just going after individuals who have done it wrongly, what are the incentives, schemes and structures we need to put in place?

“It just goes to tell you where the storage capacity for the gas we have been buying; where the official distribution and sales centers. If we deepen the regulation, deepen the licensing and enforcement, we should be able to get there.

“But like you know, we already have a gas policy which was approved at FEC (Federal Executive Council) and all of this is in there. What this group is going to do is to take a piece of that, as it concerns LPG, and see how we can take that policy document and expand and activate the whole LPG chain.”