The Minister of State for Petroleum, Ibe Kachikwu, has disclosed the reason why petrol May SELL above N175.
Kachikwu said the perennial petrol scarcity and price instability would only stop when the Federal Government removes the disparity between pump price and landing cost of the product.
He made this revelation at the at a public hearing on the fuel crisis jointly organised by the Senate and House of Representatives, Kachikwu described as shameful government’s failure at getting oil sector businesses right.
He noted that the Nigerian National Petroleum Corporation (NNPC) became the sole importer of petrol because of difficulties faced by oil marketing companies, a situation that greatly affected product supply.
A committee has been set up to consider issues in the industry and by the next 18 months, a measure of progress would have been achieved, Kachikwu told the lawmakers.
“We need to address the issue of pricing. If we are going to sell at N145 per litre, we are going to put mechanisms in place, so that the private sector can go back into importation. The landing cost of the product is about N170 to N171. The price at which we sell today is N145. So, there’s a disparity between N171 and N145. What this means is that those individuals who are really there, not with an obligation like NNPC which has to meet national supply, but with a commercial bend, will not bring in products or they are going to sell at a loss,” he said.
He noted: “We need to free the marketers to do their business. To do their business, we need to address the pricing issue. One model, for example, is at the time we got the approval of N145, the exchange rate was N285 to $1. Today, it is N305. So, even at the minimum, there’s a gap. One mechanism will be to work with the Central Bank of Nigeria in terms of exchange rate mechanisms.”
The minister also informed the lawmakers that government was looking at tax reversion, stressing that fuel importers pay taxes. He asked: “Is there a possibility to capture some of the taxes they pay, to account for some of the differentials in importation that they would have before they pay their tax?”
He said: “We are looking at whether, theoretically, you could respect the N145 per litre price and have a plural pricing system, so that NNPC and all its stations and affiliates sell at N145. And at the same time, the private marketers are able to bring in product at their own cost and sell.”
“As long as prices are hovering around N350 per litre on the borders and we are hovering at N145, there is a huge incentive to export product illegally. We have not been able to police our borders properly. Trackers must be placed in every truck that is carrying product in this country.
“You also need to deal with the infrastructural deficit issues. If we cannot repair our pipes at the speed at which we want, we will need to bring in the private sector and concession some of these pipelines, so that they can repair them and put them to use, so that in moments of emergency, we will not go through this kind of problem.”
Also yesterday, the Senate was urged to ensure the immediate payment of money owed major oil marketers as subsidy claims.
The Executive Secretary of the Major Oil Marketers Association of Nigeria (MOMAN), Obafemi Olawore, who made the plea, said government had not shown enough sensitivity to the plight of marketers on the matter.
He insisted that government still owed members N800 billion, being outstanding subsidy payment as at March 2016. He also called for a total deregulation of the downstream sector and passage of the Petroleum Industry Governance Bill, to enhance private participation.
The NNPC Group Managing Director, Maikanti Baru, informed the committee that diversion, hoarding and supply gap were some of the causes of the recent scarcity, even as he disclosed that a total of 4,501 trucks were diverted.
Mordecai Ladan, the Director of the Department of Petroleum Resources (DPR), disclosed that some filling stations that sold above the official pump price were penalised. The committee ordered that the list of the stations be submitted to it by January 16.
The Senate committee raised questions on how the NNPC got money to fund the gap between the N171 per litre landing cost of petrol and the N145 pump price, saying it would conduct a special investigation into the new subsidy regime within the next few days.