In spite of its decision to keep fuel pump price at N145 per litre, the federal government last week, expressed frustration while appearing before the Senate and House Committees on Petroleum (Downstream). EZREL TABIOWO reports.
N145 per litre no longer sustainable
Sequel to the recent fuel crisis which left festive activities grounded in the country recently, the federal government after several denials finally came out last week to disclose that the current N145 per litre fixed for Premium Motor Spirit (PMS) otherwise known as fuel, is no longer sustainable. Making the disclosure, the Minister of State for Petroleum Resources, Dr Ibe Kachickwu, who made the declaration to the National Assembly joint committee on Petroleum Resources (Downstream) last week, explained the unsustainability of the price fixed in the first quarter of 2016 arose as a result of steady increase in the price of crude oil in the international market, which was $48 in 2016 as against $67 it is now. Consequently, according to him, the landing cost of PMS, which was N133.28k per litre is now N171 per litre, which has resulted into stoppage of importation of the product by independent marketers, making the Nigeria National Petroleum Corporation (NNPC) to be the 100 percent importer of the product.
The minister disclosed further that as a result of the N26 difference per litre between the current landing cost of the product (N171) and pump price of N145, NNPC which has been singularly importing the product at the volume of 25million litres per day since October last year, has been incurring loss of about N800-N900million on daily basis which in cumulative term is about N85.5billion now.
Three-way solution
According to him, already government has mandated him and along with acommittee set up to find ways out of the problem which he said requires emergency of about 18 months before the local refineries are expected to be in good shape. Specifically according to the minister, three-way solutions are being proffered.
“One: is for the Central bank of Nigeria (CBN) to allow the marketers access forex at the rate of N204 to a dollar as against the official rate of N305 to keep the pump price of fuel per litre at N145. “Two: to give room for modular deregulation where NNPC would be allowed to continue selling at N145 per litre in all its mega stations across the country while the independent marketers should be allowed to whatever price profitable to them in all their outlets.
“Three: to look at the direction of blanket subsidy for all the importers in bridging the gap which would be like going back to a problem that had earlier been solved “, he said.
Landing cost
saga Kachikwu said, “We are looking at an 18-monThemergency period. During this emergency period, we need to address the issue of pricing. There is price disparity between the landing cost and the cost of selling (pump price). If we must sellat N145 (per litre), we need to put mechanisms in place so that the private sector can go back to importation.
We now have a committee that is looking at this and it will be subjected to review. “The landing cost of the product today is about N170 or N171. The price that we should sell is N145. So, there is a disparity.
What that means is that those individuals who are bringing in theirs will not be able to meet their obligations like the NNPC for commercial supply. We need to step back.” Chairman of the committee, Senator Kabiru Marafa, who interjected Kachikwu, said the minister had stirred the hornets’ net by the statement.
He asked, “Are you saying that the N171 is what an average Nigerian will pay for at the filling station or what the marketer will lift from the depot or the cost from importation?” Responding, Kachikwu said, “Our point is that there is a gap and we need to see how we can fill that gap. There are three mechanisms that we are looking at in dealing with that gap. Whatever we do, giving the constraints of the NNPC handling 100 per cent of the supply which may become an overriding burden on the corporation, we need to free the marketers to do their business. To do their business is to address the
Addressing landing cost differential
“To address the pricing issue, we are looking at three models. When we got to N145 (per litre) the exchange rate was N285 (to a dollar), today it is at N305. Even at the minimum, there is a gap there. If you walk to the CBN to check the modulation of the exchange rate to sell at N145, the cost of purchasing it today is about N240; it is not N285 or N305.”
He, however, stressed that the final solution to the problem was for the Nation to put her refineries in good shape in a way that 80 percent of local consumption of the product should be provided for locally. Aside refineries, the minister added that infrastructural deficits in the sector like effective railway transportation, functional pipeline network across the country as against trucking by road if put in place, would help in easy distribution of the product.
Reasons for recent fuel scarcity
In his own submission, the Group Managing Director of the NNPC, Dr Maikanti Baru, said the just ended fuel scarcity was caused by combination of factors ranging from diversion of the product from depots by tanker drivers to neighbouring countries where it sold between N300 to N400 per litre to outright hoarding of the product by unscrupulous marketers at home. According to him, the NNPC had prior to the scarcity, had 1.9billion litres in reserve , which was emptied as a result of panic buying arising from rumour earlier made on social media about price increase , the one day strike action embarked upon by PENGASSON, hoarding and diversion by some dubious players in the sector.
Heads of other critical agencies in the sector like the Department of Petroleum Resources (DPR), Petroleum Product Pricing and Regulatory Agency (PPPRA), Independent Petroleum Marketers Association of Nigeria (IPMAN), Petroleum Tankers Drivers (PTD) etc, attended the investigative hearing and made submissions. It’s national emergency
In his closing remarks, the chairman of the joint committee, Senator Kabiru Marafa (APC Zamfara Central) said the various submissions made by all the stakeholders, called for urgent solution for way out of the wide gap between existing between the current landing cost and the pump price. He said: “The intervention made today by this committee is very helpful in the sense that going by statistics given that landing cost of fuel per litre is now N171 which in the long run may result into the product selling for N185 per litre .
“This (increased pump price) absolutely would not have augured well for the ordinary Nigerians and that is the reason why this committee and the one set up by the President should come up for peoples friendly solution as quickly as possible “.
