Earlier this month, the Nigerian National Petroleum Company Limited (NNPC Ltd), following criticism from the Nigeria Custom Service (NCS) stated that between January and August 2022, the total volume of Premium Motor Spirit (PMS) imported into the country was 16.46 billion litres, which translates to an average supply of 68 million litres per day.
The NNPC Ltd insisted further that the average daily evacuation (depot truck out) from January to August 2022 was 67 million litres per day. The company buttressed its point with reference to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), adding that the daily evacuation (depot loadouts) records of the NMDPRA carry daily oscillation ranging from as low as four million litres to as high as 100 million litres per day.
Before the state oil company released the data, the NCS had questioned the claim that the country consumes 60 million litres of petrol daily as the Customs’ comptroller-general, Hameed Ali, at a session with the House of Representatives Committee on Finance alleged that as much as 98 million litres of the products were being lifted daily.
“I remember that last year we spoke about this. Unfortunately, this year, we are talking about subsidies again. The over N11 trillion we are going to take as debt, more than half of it is going for subsidy. The issue is not about the smuggling of petroleum products. I have always argued this with NNPC.
“If we are consuming 60 million litres of PMS per day, by their own computation, why would you allow the release of 98 million litres per day? If you know this is our consumption, why would you allow that release?” he asked.
Analysts say Nigeria has been in a game of wit over the issue of smuggling of the petroleum product and the actual data on the consumption of the product.
National President of Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Prince Billy Gillis-Harry, noted that the government would need to carry along the players in the sector to avoid a flip-flop, adding that the market must be fair to all.
Admitting to the stability in the market since the sector was deregulated, stakeholders believe that addressing foreign exchange challenges would enable the marketers to import products instead of allowing the national oil company to play the dominant role of the importation of petroleum products.
Gillis-Harry said that smuggling, product diversion and the financial implications are worrisome.
His main solution, however, is for the government to adopt a solution developed by his association to monitor products from depot to destination.
With a daily fuel supply of 68 million litres, the funding of petrol imports solely by NNPC is a huge financial burden on its books.
While there are arguments about the exact daily consumption figure for petrol, the NNPC Limited laid the matter to rest, insisting that the figure remained at 68 million litres per day and has offered to submit itself to a forensic audit of fuel supply and subsidy management.
It acknowledged the possibilities of criminal activities in the PMS supply and distribution value chain, pledging: “As a responsible business entity, NNPC will continue to engage and work with relevant agencies of the government to curtail smuggling of PMS and contain any other criminal activities.”
The company also pledged to deliver on our mandate of ensuring “energy security for our country with integrity and transparency.”
NNPC Limited further explained that without subsidy, petrol will be sold at N462 per litre as against the current pump price of N179 per litre.
NNPC limited equally noted the average Q2, 2022 international market-determined landing cost was $1,283/MT and the approved marketing and distribution cost of N46/litre.
According to the company, the combination of these cost elements translates to retail pump price of N462/litre and an average subsidy of N297/litre and an annual estimate of N6.5 trillion on the assumption of 60 million litres daily PMS supply. This, it said, will continuously be adjusted by market and demand realities.
The company explained further that between January and August 2022, the total volume of Premium Motor Spirit (PMS) imported into the country was 16.46 billion litres, which translates to an average supply of 68 million litres per day.
Similarly, import in the year 2021 was 22.35 billion litres, which translated to an average supply of 61 million litres per day.
‘‘The NNPC Limited notes the average daily evacuation (Depot truck out) from January to August 2022 stands at 67million litres per day as reported by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). Daily Evacuation (Depot load outs) records of the NMDPRA do carry daily oscillation ranging from as low as 4 million litres to as high as 100 million litres per day.’’
Plans to end Nigeria’s fuel imports
Nigeria has four refineries, but utilisation is low. NNPC is taking on debt and bringing in external managers to run the four plants.
Even if all four of these refineries were running at 90%, and producing 18 million litres of petrol, Kyari said, the country would still be in a net deficit. “The population has grown, demand has grown, the middle class has grown. There’s near exponential growth in the need for PMS and it’s not going to stop.”
NNPC holds a 20% stake in the Dangote refinery. This gives the company the right of first refusal to supply crude to the plant, in addition to taking 20% of the products.
The Dangote plant will produce more “gasoline than in a typical refinery at 50mn litres of PMS. That, and our own refineries, will not see any import of fuel into the country next year. By mid next year, everything will change.”
The addition of the smaller condensate refineries, should they move ahead, will see Nigeria become a net exporter, Kyari said.
While NNPC has benefited from higher sales revenues, it continues to lose substantial volumes of oil to theft – and the threat of theft.
Kyari talked extensively on the topic of security. “We know the people involved”, he said. “Beyond the small rats we arrest we are going after everyone else.” The Economic and Financial Crimes Commission (EFCC) is “pursuing the cash”, he said. “There are oil workers, maybe NNPC workers, people from the communities, even high flyers. The government is going after them.”
Nigeria’s oil production has fallen this year, as theft has increased. High-ranking officials in the Nigerian Navy have taken issue with NNPC’s statements on the volume of theft, disputing figures of 200,000-400,000 bpd.
Kyari said this number, though, included disrupted exports and shortfalls in production. “We deliberately shut down pipelines whenever we see infractions we cannot control,” he said. “We believe strongly that up to 200,000 bpd is stolen, but not in barges.”
The NNPC head said thieves had constructed their own pipelines, up to 4 km long, running to their own vessels.
One of the ways in which the authorities are cracking down on bunkering is through securing private expertise. Kyari said the deal with a company owned by former militant Government Ekpemupolo, known as Tompolo, had been agreed following a tender.
“We are dealing with a company, we are not dealing with Tompolo. We believe we have taken the right decision.”