It is regretful that Nigeria’s petroleum refineries are not operational, and the Federal Government has ruled out the option of putting subsidies on Automotive Gas Oil, often known as diesel.
Mele Kyari, the Chief Executive Officer (CEO) of the Nigerian National Petroleum Company (NNPC) Limited, claimed on Tuesday in Abuja that the government cannot afford to pay fuel subsidies.
He made these remarks while testifying before the House of Representatives Committee on Downstream alongside the CEO of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Farouk Ahmed, and others.
Kyari and Ahmed, as well as other oil and gas industry stakeholders, have been summoned before an investigative hearing about the scarcity and rising prices of Premium Motor Spirit (also known as gasoline), diesel, and Liquefied Petroleum Gas, LPG (also known as cooking gas) in the country.
In his presentation, the NMDPRA administrator recommended three solutions to the supply and distribution chain problems.
He said the “required amount of forex for importation of the petroleum products (should) be made available to the genuine importers at CBN official rate.”
Ahmed also requested that the government “encourage the establishment of more local refineries and LPG processing facilities to meet domestic demands,” adding that “an increase in the LPG supply from major domestic producers, including NLNG, BRT processing, CNL, LPG, and FSO,” would alleviate some of the problems.
The NMDPRA boss stated that in addition to the three suggested solutions, “an extensive consultation is required among key stakeholders towards lessening the present tension being generated by the global high oil prices.”
“Presently, Nigeria is a net importer of refined petroleum products, including AGO, as the country imports about 100 per cent of AGO consumed locally,” he said. “An average of 12 million litres is also being consumed daily based on average truck-out quantity.
“The upswing in international price, combined with the prevailing naira/US dollar exchange rate, contributes about 80 per cent of the product price at the pump. While the official naira/US dollar exchange rate has remained relatively stable at about N415/US dollar since the beginning of the (Russia-Ukraine) war to date, the parallel rate on the other hand has increased considerably.
“The challenge with this is that petroleum products importers are unable to access the required amount of forex at the official rate and, therefore, rely on the parallel market to complement their forex US dollar requirements. In addition, the monitored price of AGO currently ranges between N710/litre and N750/litre in the coastal areas, while the LPG price is about N800/kg.”
When asked to be specific on the immediate solution, he stated that the respite to cushion the effect of high price was to make foreign exchange available for marketers to import AGO at the official exchange rate of N415 to a dollar.
“We have only one solution if I can say it; make forex available to importers to import at the official exchange rate. If we do not do that, I do not see any other solution. Even if our refineries are back on stream, they are buying crude at the official international price,” Ahmed proposed.
According to him, the transportation industry heavily relies on AGO to move goods and services and as such, diesel is a major factor in the distribution of PMS being presently regulated.
“One of the major reasons for the scarcity being witnessed in the our country is as a result of the rise in the price of AGO,” said the NMDPRA boss who hinted that President Muhammadu Buhari had approved the upward review in freight rates by N10 to alleviate the challenges, effective June 1.
This, he explained, was in the effort to alleviate the challenge resulting from the upswing in the global price of AGO and the implication on the cost of the distribution of PMS nationwide.
In their separate presentations, representatives of oil marketing bodies, the Independent Petroleum Marketers Association of Nigeria (IPMAN), the Depot and Petroleum Marketers Association of Nigeria (DPMAN), and the Major Oil Marketers Association of Nigeria (MOMAN), sought the government’s intervention regarding forex with hopes that functional refineries would resolve some of the issues.
