NNPC to engage more kerosene marketers for product availability

The Department of Petroleum Resources (DPR), an agency under the Nigerian National Petroleum Corporation (NNPC) says it is now working out a list of independent marketers willing to obtain permits to begin importation of kerosene into the country in a post-subsidy move to ensure the availability of the commodity going forward.

The DPR says it is expecting the approved list from the Petroleum Products Pricing Regulatory Agency (PPPRA), which would be announced   soon.

This is coming weeks after the Federal Government’s abolition of all subsidies paid on dual-purpose kerosene (DPK).

“We are expecting the Petroleum Products Pricing Regulatory Agency (PPPRA), to tell us those who have come forward with requests for allocation to import kerosene into the country and by next week, we expect that those applications should start coming in,” said Mordecai Ladan, director of DPR, in a telephone interview with BusinessDay.   

DPK, also known as household kerosene (HHK), is a petroleum product used as a domestic fuel for lamps, stoves, and cookers, and remains an important lighting and cooking fuel for low-income groups in the country, but it is hardly available and expectedly expensive.

The move to involve independent marketers in its importation is targeted at bringing an end to the scarcity of the product and ensuring it becomes readily available to the public.

According to Ladan, “only the NNPC imported and supplied DPK in the country before now, resulting in perennial shortages, but with new marketers being considered for the same purpose, the issue of scarcity regarding the product may soon become a thing of the past.”

He further assured that DPR would also intensify its monitoring and enforcement role to ensure full compliance by all marketers with market rules and protect the Nigerian public against any form of abuse or rip-off.

In November 2015, Vincent Ezeala, executive director, commercial for the Pipelines Products Marketing Company (PPMC), said the Nigerian National Petroleum Corporation (NNPC) had resolved to downplay the importation of kerosene in favour of bringing in premium motor spirit (PMS) otherwise known as petrol.

Ezeala said, “kerosene subsidy was a racket, as independent marketers who benefited from it continued to sell to the public above officially agreed prices.”  The Federal Government announced in January, that it had hiked the price of kerosene from N50 to N83 per litre, thereby officially ending subsidy on the product.

However, the Petroleum Products Pricing Regulatory Agency (PPPRA), in its product pricing template, said the N83 per litre price applies only to the Nigerian National Petroleum Corporation (NNPC), meaning that other petrol stations and dealers can sell higher than the official price announced.

The PPPRA template shows that at N83 per litre, the Federal Government would gain N10.72 for every litre sold, giving the expected open market price of N72.28 per litre. The expected open market price is defined as the landing cost, plus the total margin due to middlemen.

Giving a breakdown of the price, the landing cost of the product is N57.98 per litre, while the total margin due to middlemen is N14.30. For a long time, subsidies on kerosene were defended in Nigeria because of the widespread belief that the poor would benefit from lower fuel prices, but that belief proved to be an economic illusion.

Ending the expensive subsidy regime implies a cost-saving effect on the Nigerian government and significant financial savings for the national treasury.

As at November 2013, official records showed that the Federal Government spent N634 billion to subsidise the retail price of kerosene in the three preceding years.

The breakdown showed that N110 billion was spent in 2010, N324 billion in 2011 and N200 billion in 2012, amounting to N634 billion in the three years under review.

By January 2014, the subsidy sum spent on petroleum products, including kerosene, between 2012 and 2013 jumped to N1.3 trillion or $8.49 billion.

In 2015, the Federal Government made a revised budget of N458.68 billion or $2.59 billion for petrol subsidy.

YANGE IKYAA