There are more troubles ahead for Nigeria as it may continue to experience intermittent shortage of fuel supply because of high prices of crude oil at the international market.
This has made participation in the NNPC’s direct supply and direct purchase (DSDP) scheme unattractive for some of the companies engaged in the programme.
Information reaching BusinessDay indicates that some of the companies that engage in DSDP, a programme put in place by NNPC to ensure uninterrupted fuel supply are beginning to have issues occasioned by the upward movement of the price of crude oil at the international market.
The price of crude oil is $71.64 per barrel and this could be higher because of the ban on exportation of Iran crude and the crisis in Venezuela, which has led to a slip in supply to the international market and consequently push the price of crude oil.
An industry source tells BusinessDay that some of the companies are finding the scheme, especially as it affect fuel supply, unprofitable and consequently preferred to import diesel without NNPC raising objections. This is the major factor responsible for the recent slip in supply that led to queues resurfacing at filling stations in some parts of the country.
The source says the country is yet to see the end of the situation as long as the price of crude oil continues to rise and the country’s refineries are not working.
This situation is said to have put pressure on NNPC, as it has to go to spot markets to source for fuel at a premium. This would certainly lead to rise in subsidy claims for fuel.
Already, the minister of State for Petroleum Resources, Emmanuel Ibe Kachikwu, has said landing cost of petrol is N35 higher than the pump price of N145 per litre.
The rise in global crude oil prices after the 2016 hike in petrol price, the minister says, brought back subsidy.
Recalling the experience of 2016, when the government increased petrol price from N86.5 to N145 after months of severe scarcity, he describes fuel subsidy as an emotive issue.
According to Kachikwu, even when there was a consensus on how stakeholders were going to do it, there were still issues at the very tail end of the moment; NUPENG and PENGASSAN supported but, of course, the other members of the trade unions pulled out.
Nigerians, he says, saw through what the government was trying to do and let it happen. “When you look at the gap today, the landing cost is about N180 per litre and sale price is N145. Imagine if it (pump price) was N90 – something; we will literally be a bankrupt country,” he says.
He states that dealing with subsidy requires a very efficient management of information – getting everybody who is stakeholders to tie into it, noting that the government had not paid marketers all the outstanding subsidy arrears.
There is need to find a way of fixing refineries quickly, whether it is government-funded or whatever – my preference is always private sector funding, he says.
The labour unions have never really said they would not be supportive of an attempt to take away this subsidy element; the unions have always said, ‘If you are doing it, show me what you [will] do with those new receipts of income. Two, what do you do with the refineries?’ Therefore, we need to address those to even get their buy-in.
“There is need to segregate between those who need subsidy and those who don’t; you will find that 80 per cent or more of those who get subsidy today do not need it. There is nothing necessarily bad with some element of subsidy if it is well-managed and is very little, and if the private sector can take it away completely; that is fantastic. That is the most ideal situation.”
The NNPC, which has been the sole importer of petrol into the country for about two years after private oil marketers, withdrew from the importation of the product, bears the burden of subsidising the product.
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