In this report, Peter Uzoho asks why the federal government continues to pay petrol subsidy on a product that has become
rarely available.
Nigeria may be spending not less than N4.27 trillion to keep its costly petrol subsidy scheme if the incoming president decides to
jettison the removal of petrol subsidy by the end of June this year. As reeled out last week during a televised programme by the
Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPC), Mallam Mele Kyari, of the total landing
cost of petrol currently standing at N295 per litre, government pays N185 as subsidy. With all the spending in the name of subsidy, the questions
begging for answers are: why then has petrol scarcity become a
recurring decimal in Nigeria, defying all solutions.
As Nigerians are now forced to pay through their noses to buy
petrol at between N250 and N650 per litre, above even the N300
landing cost, even under excruciating conditions, who then is
subsidising who?
ONE YEAR UNRESOLVED SCARCITY
Since the scarcity that began in February 2022, due to the
breakdown in supply and distribution which was triggered by the
importation of adulterated petrol into the country by NNPC and its
partners in the Direct Sale Direct Purchase (DSDP) deal, the
nation has not recovered from that incident. Till date, petrol has
been scarce at filling stations, leading to all sorts of arbitrage in the
system.
The N165 per per litre price of petrol suddenly ballooned to
between N250 to N650 at different locations, no thanks to some
marketers in the petrol marketing business who took advantage of
the scarcity to impose suffering on the citizens. At every filling
station in the country where petrol is available, especially the ones
owned by NNPC and well organised depot owners, many motorists
spend long hours on queues waiting for turn.
The situation has now opened a new window of business
opportunities for fuel attendants who now hike prices as they suits
them and opens and closes stations whenever they like. The black
marketers are smiling to the banks as they make brisk business
through buying petrol with containers and resell to desperate
buyers at outrageous prices. Even the petrol tanker drivers are making a kill from diverting
products meant for certain locations to other places, both in- country and neighbouring countries, where they sell far above the
normal price, thus contributing to the shortages being lamented about.
NNPC’S POSITION
However, as part of the efforts to tackle the scarcity challenge,
NNPC had disclosed penultimate Sunday in a graphic document
that it had ramped up supplies to marketing companies that have
depots, revealing that penultimate week beginning 28 January to
3rd February, it had evacuated 450.92 million litres of petrol.
The company disclosed that the average daily evacuation figure
for the week stood at 63 million litres while year-to-date at the time,
average daily evacuation for the week under review was 64 million.
Kyari had said the country needed N4.27 trillion to meet its
subsidy requirements, disclosing that the NNPC transfers products
to oil marketing companies at N113 per litre to establish a market
price of N170, for last year.
According to the GCEO, some adjustments “brought us to the
reality of the cost of vessels and that adjustment took the NNPC to
a different level in terms of logistics.” He stated that NNPC has
been unwavering on the transfer price from the “landing location”
to the marketing companies.
“Yesterday’s (penultimate Monday), data is that this product will
land in this country at N295 to the litre. That means you have to
sell it at N113 to the marketing companies so that we will be able
to maintain the current subsidy regime that we’re running,” Kyari
said.
“It means you have N185 per litre of subsidy on every product that
comes into this country.
“Now, if you look at the average that we’ve done of 63 million litres
January to date, and you convert it to 365 days, that means you
need N4.27 trillion for you to meet the subsidy requirements for
this country,” he added.
With the NNPC as the country’s only importer of petroleum
products, he said the law provides for N3.36 trillion for the January
to June subsidy regime.
“That means technically, the Ministry of Finance is supposed to be
giving us cheques against this subsidy value on a monthly basis,”
Kyari stated.
“But it’s not a real situation in the sense that we’re a company
owned by the state today. We have fiscal obligations because,
ultimately, whatever money NNPC makes is from fiscal obligations
– taxes, royalties and margin.
“Because we have not diluted the ownership of this company, all
three belong to the state today. So, the only way NNPC can do this
is to hold back the fiscal obligation, so that we can use that to buy
the product and come and sell it to the market”, he said.
CROSS BORDER SMUGGLING
Explaining how smuggling of Nigeria’s subsidised fuel has aided in
worsening the shortages, Kyari said a fuel truck from Lagos
delivering to a filling station in Maiduguri can earn a margin of
N270,000 as opposed to N40 million or N50 million when sold
across the border to neighbouring countries.
He added that the NNPC keeps track of every truck that has left
every depot in the country, adding that fuel supply had increased
from 63 million litres per day to over 70 million litres.
“We have truck numbers, destination fuel stations, destination
states. And we have published these by list of states – where
those trucks go, the number of trucks that have left those [depots],
etc.
“When they leave the depots, where do they end up? That is what
would have translated to national consumption,” he said.
According to him, it is practically impossible under an arbitrage
environment and under a situation where neighbouring countries
are helpless to say that there will be no cross-border movement of
petroleum products.
“That’s why we’re making it legitimate in the sense that NNPC is
now buying fuel stations across our borders, so that we can deliver
to them legitimately. It is very simply impossible to stop this until
we are able to solve this arbitrage issue.
“So, definitely, what you’re dealing with is a logistic challenge,
rather than anything else,” he said.
GOVT’S INSINCERITY
While Nigerians are left to groan and suffer as a result of the
problem that has now become a national energy and security
challenge, the federal government doesn’t seem to be doing
enough to address the challenge permanently. At best, the
government has only succeeded in feeding the citizens with
falsehood.
For instance, when the news broke out in January that the federal
government had increased the ex-depot price and pump price from
N148 to N172 and N165 to N185 per litre, respectively, the
government denied endorsing any price increase.
At the time, the Minister of State for Petroleum Resources, Chief
Timipre Sylva had through his Senior Adviser on Media, Mr.
Horatius Egua, said President Muhammadu Buhari did not
endorse any hike in the prices of petroleum products, contrary to
the rumours that fuelled the latest scarcity and the resultant long
queues at filling stations across the country.
“President Muhammadu Buhari has not approved any increase in
the price of Premium Motor Spirit (PMS) or any other petroleum
product for that matter. There is no reason for President
Muhammadu Buhari to renege on his earlier promise not to
approve any increase in the price of PMS at this time.
“Mr. President is sensitive to the plight of the ordinary Nigerian and
has said repeatedly that he understands the challenges of the
ordinary Nigerian and would not want to cause untold hardship for
the electorate.
“Government will not approve any increase of PMS secretly without due consultations with the relevant stakeholders. The
President has not directed the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) or any
agency for that matter to increase the price of fuel. “This is not the time for any price increase in pump price of PMS.
What is playing out is the handiwork of mischief makers and those planning to discredit the achievements of Mr. President in the oil
and gas sector of the economy. I appeal to Nigerians to remain calm and law abiding as the government is working hard to bring
normalcy to fuel supply and distribution in the country,” Sylva had said.
But in contradiction to his earlier denial that government had not approved any increase in fuel price, Sylva told journalists in Lagos
last Friday after his inspection tour of some filling stations in the state, that the actual pump price of petrol remained N184 as
obtained in all NNPC stations, adding that whatever price NNPC is selling is the current pump price.
“Today, I went to an NNPC filling stations and they are selling at N184 and that’s what all NNPC stations are selling. So, that is the
price and all NNPC stations, 900 of them are selling at that price. But of course, you have all these sharp practices in the system
and we’re trying to see how we can address them”, Sylva stated. Whatever it is, what Nigerians really want is that government
should make fuel available to them and prevent the halt the prolonged scarcity that has had devastating impact on their lives
and livelihood.
