We need N3.4trn to subsidise daily fuel consumption – NNPC
...says subsidized petrol is being smuggled out of Nigeria
The Nigerian National Petroleum Company (NNPC) Limited says the sum of N3.4 trillion is needed to subsidise the 66.7 million litres of Premium Motor Spirit (PMS), popular known as petrol for daily consumption and not the N4 trillion approved in this year’s budget.
Mele Kyari, the chief executive officer of NNPC disclosed this at the resumed hearing of the House of Representatives ad-hoc committee investigating subsidy regime from 2013 to 2021 in Abuja on Monday.
Kyari who was represented by Umar Ajia, the NNPC chief financial officer said there is currently N209 subsidy per litre and with an average of 66.7 million litres, the sum of N3.4 trillion is needed for the year 2022.
He said: “We have about 1.6 billion litres incoming, land and marine. This is what is the minimum level we have to maintain, especially as we approach winter. Most of the refineries that we procure are actually shutting down their operations because of the clamour for green energy and COP26 compliance.
“There is a huge arbitrage for anybody to move product to outside. We are not saying that bulk of the product is smuggled. The reality is that there is no study to validate the actual consumption. What we are reporting daily is what the authority, which is the regulator publishes. They are represented at every depot in Nigeria.
“Exchange rate has been moving steadily from N195.5 per dollar to N390.6 to a dollar, on average. The subsidy scheme is two ways, the fx subsidy and price.
“The shipping cost has doubled, therefore, the landing cost of PMS has moved from N87 per litre in 2015 to about N327.68 per litre today. When you compare it to what we sell, you have a N209 on every litre. When you multiply the N209 per litre with an average of 66.7 million litre, you are talking about N3.4 trillion subsidy for the year as you recall, in the 2022 appropriation.
“The reality today is that if one were to take statistics of the number of vehicles in Nigeria, how many Keke Napep do we have? How many pumping machine, how many pumping machines do we have. On a routine visit, I saw nothing less than a million keke, take an average that each one uses 4 litres every day, that is 4 million litres, one city.
“We have not done a study to validate, people are say that how is it that we are evacuating 66 million a day, that is the reality. Some days, what is evacuated can go as much as 100 million a day, while some weekends, we do zero. The marketers are watching.
“States that consume the most are states like Oyo and Ogun State, they even consume more than Lagos State, so you wonder, is it that they have more vehicle than Lagos. This explains that this are states with porous borders and that will explain why this bulk evacuation is going out of Oyo and Ogun States, probably to neighboring countries.”
Answering the question as to the huge allocation of PMS to states near border towns, the NNPC boss lamented that previous efforts made by Nigerian Downstream and Midstream Petroleum Regulatory Authority to install Acquila facility with a view to forestall illegal transportation of PMS across illegal border failed.
He said: “If you have N5 million, you can cross the borders with trucks laden with PMS and that is the bitter truth, we have porous borders; yes we have Customs but I do not know.
“PMS crosses everywhere, to Cameroon through the North East, Nigerian PMS gets to Mali; our neighbouring countries hardly import PMS; in fact, some of them do not have the cover to back up imports.
“Cameroon refinery got burnt sometime last year or so, since that time, they have not imported PSM but they are still using PMS; if you go to Niger, you find that PMS is sold in bottles.
“To them, it is a cheaper source, why waste their foreign exchange, so we are subsidizing our neighbours that is the simple truth.”
The NNPC helmsman also told the committee that the company has resolved to extend the Direct Sales Direct Purchase (DSDP) contract which was to end in August, 2022 in order to avert fuel scarcity in December and during the 2023 general elections.
“It is very dangerous period to begin to retender for that because we are facing the winter, these are the difficult “embers months’’ that we normally avoid fuel scarcity.
“You know the scarcity in Nigeria is really associated with Christmas period so if you now tender, the tendering process will take one or two months. So what the Board approved we do is to extend the contract for six month such that we have passed the winter and we have passed the election, otherwise we could have problems during elections,” he stated.