Group managing director, Nigerian National Petroleum Corporation (NNPC), Mele Kyari, has told Nigerians that it is impractical to expect the state-owned corporation to remit full crude oil receipts when it is expected to use the same money to fund subsidy and other costs.
“You cannot eat your cake and have it. If you demand we sell below market price, there is a cost to it and someone will pay for it,” Kyari said in an interview with Channels Television.
When a product is bought for $100 and they are compelled to sell at $70, someone will be bearing the cost, Kyari said, saying the effect of these charges is that NNPC will be unable to deliver at full cost.
Every year, the National Assembly passes appropriations that require the NNPC to fund activities that are not commercial, for example, laying a pipeline to a location where there is no market, he noted.
This could be part of the government’s strategic decision to attract investment in that area, but to the extent that there is no activity at the time, the investments made there by the NNPC would not yield returns and reduce the corporation’s remittance to the government.
“You cannot invest in things like this and ask the NNPC to charge it as first-line charge and then expect the NNPC to remit full cost to the Federation,” the GMD said.
He assured that the corporation would continue to improve efforts at transparency, including publishing its 2020 financials by June this year.
Since the increase in the global price of crude oil, there have been expectations that the retail pump price of petrol would rise following an increase in the landing cost and claims of full deregulation of the sector by the government.
In a Reuters report, the chairman of the Major Oil Marketers Association, Tunji Oyebanji, was reported to have said the NNPC was losing at least N30 ($0.08) per litre on gasoline (petrol) as of early February, based on the international fuel price and the publicly available dollar exchange rate.
This comes to N1.2 billion ($3.15m) per day assuming daily consumption of 40 million litres.
The removal of fuel subsidy has remained Nigeria’s longest challenge, especially at a time when trust deficit between the governed and the government widens.
With higher inflation and worsening poverty, government is caught napping, having failed to deregulate and implement its price modulation agenda in 2016.
“Deregulating the downstream sector which would many times involve raising the pump price of petrol is always a challenge in a country where the subsidy on petrol prices is seen as the only source of social security, and in many cases is resisted by the populace,” analysts at CSL Stockbrokers said in a report.
“We have always expressed concerns that the current timing may be inopportune and the government be forced to return to the subsidy regime given the effects of the pandemic and recent hike in electricity tariffs on the already squeezed Nigerian consumer,” CSL Stockbrokers noted.
