Fuel Consumption Hits 80m Litres Daily Subsidy Skyrockets
Consumption of Premium Motor Spirit (PMS) has risen to about 80 million litres daily, pushing up subsidy on the commodity to an estimated N484bn monthly, going by latest figures from the Nigerian National Petroleum Company Limited.
An analysis of PMS weekly evacuation/dispatch data from March 4 – 10, 2023, obtained from NNPCL indicated that a total of 558.83 million litres of petrol was evacuated during the period, translating to an average daily consumption of 79.83 million litres.
Around mid-last month, the Group Chief Executive, NNPCL, Mele Kyari, said about 66 million litres of petrol was pumped daily into the market by the oil firm, as the company was spending about N202 on every litre of PMS consumed across the country.
“Today, by law and the provisions of the Appropriation Act, there is a subsidy on the supply of petroleum products, particularly PMS imports into our country. In current data terms, three days ago, the landing cost was around N315/litre.
“Our customers are here; we are transferring to each of them at N113/litre. That means there is a difference of close to N202 for every litre of PMS we import into this country. In computation, N202 multiplied by 66.5 million litres, multiplied by 30 will give you over N400bn of subsidy every month”, the GCEO had stated.
Since January till date, the cost of crude oil has revolved around $83/barrel, while the official exchange rate has been about N460/$. Crude oil price and foreign exchange rate are the major determinants of refined petroleum products’ cost, according to operators.
Going by NNPCL’s latest fuel consumption figure of 79.83 million litres daily, and a subsidy of about N202/litre, it implies that the oil company would be spending an estimated N483.8bn to subsidise the commodity monthly.
NNPCL is the sole importer of petrol into Nigeria and has maintained this for several years. Other marketers of the commodity stopped its imports due to the difficulty in accessing foreign exchange required for PMS purchase.
NNPCL, however, has been lamenting the huge burden of PMS subsidy, as Kyari pointed out in February that this had been a drain on the cash-flow of the national oil firm.
He explained that the continuous funding of petrol subsidy by NNPCL had been ongoing without refunds from the Federal Ministry of Finance, Budget and National Planning, despite the fact that subsidy had been budgeted for in the Appropriation Act.
“But there is a budget provision for it (subsidy). Our country has decided to do this. So, we are happy to deliver this, but it is also a drain on our cash flow, and I must emphasize this.
“For as we continue to support this, you will agree with me that it will be extremely challenging for us to continue to fund this from the cash flow of the company when you do not get refunds from the Ministry of Finance”, Kyari had stated in Abuja.
Fuel subsidy is a topical issue in Nigeria. Many experts, local and international institutions have called for a halt in petrol subsidy. However, labour unions had kicked against an outright subsidy halt, on the grounds that the Federal Government must fix Nigeria’s refineries first.
Analysts at Centre for the Promotion of Private Enterprise recently explained that Nigeria would save about N10tn annually by the elimination of subsidies on PMS and foreign exchange.
Petroleum Stakeholders Strategise For Post-Subsidy Era
Stakeholders in Nigeria’s mid stream and downstream petroleum sectors have urged the Federal Government to outline strategies for a sustainable future in the downstream sector.
The appeal was made during a virtual online workshop, Friday, in Lagos with the theme “Deregulation of the Nigerian downstream sector: The day after”.
The Tide’s source reports that the workshop was organised by the Nigerian Petroleum Downstream Industry in collaboration with the African Refiners and Distributors Association (ARDA).
The stakeholders at the workshop called on the government to implement appropriate palliatives in the form of public transportation and freight of agricultural produce.
They urged government to ensure transparent and effective communication, improve access to foreign exchange, trade finance, guarantee strategic stock, and provide access to crude oil for refineries ahead of the plan to embark on the total removal of petrol subsidy.
The workshop offered the industry regulator and all players across the midstream and downstream value chain the opportunity to deliberate on measures that needed to be put in place ahead of the full implementation of the Petroleum Industry Act (PIA).
The participants also focused on the need for operators in the industry to professionalise the midstream and downstream petroleum sectors ahead of the take-off of full deregulation.
The Authority Chief Executive of the Nigerian Midstream and Downstream Petroleum Regulatory (NMDPRA), Mr Farouk Ahmed, said the Authority would allow free market pricing once the sector was fully deregulated.
On his part, the Executive Director, Distributions System, Storage and Retail Infrastructure of NMDPRA, Mr Ogbugo Ukoha, spoke on the role of the regulator in pricing, safe operation and enforcement, while the Managing Director, CITAC Africa, Gary Still, touched on market liberalisation or elimination of subsidies.
Also speaking, the National President of the Nigerian Association of Road Transport Owners (NARTO), Alhaji Othman Yusuf, warned that the full deregulation of the downstream sector and complete removal of petrol subsidy would bring about opportunities and challenges.
The National President, Independent Petroleum Marketers Association of Nigeria (IPMAN), Elder Chinedu Okoronkwo, revealed that the marketers are in full support of the government’s plan to embark on full deregulation of the downstream sector.
Okoronkwo, who was represented by Mr Mike Osatuyi, IPMAN’s National Operations Controller, warned Nigerians to prepare to pay up to N750 for every litre of petrol after the removal of subsidy.
He added that the pump price is likely to drop to around N500 if the Government encourages the Central Bank of Nigeria (CBN) to provide forex to marketers at the official rate.
Okoronkwo also urged the government to channel savings from subsidy provisions to provide palliatives to the masses, adding that government must be sensitive to resentment from Nigerians.
Mr Taiwo Oyedele, the Fiscal Policy Partner and Africa Tax Leader at Pricewaterhouse Coopers (PwC), charged the government and the regulator to identify potential pitfalls that could trigger resentment from citizens before, during, and after the removal of the petrol subsidy.
According to him, deliberate public sensitization, industry engagement, and collaboration with civil society organizations are needed to aid public buy-in during the implementation of full deregulation.
He said in the course of implementing the policies, the government’s interpretation of its strategy must be issue-based and not confrontational.
Executive Vice Chairman of the Federal Competition and Consumer Protection Commission (FCCPC), Mr Babatunde Irukera, advised the industry regulator to establish quality and safety standards for petroleum products.
Irukera, represented by Mrs Morayo Adisa, his Technical Consultant, said this include fuel quality standards, safety regulations for storage and transportation, and environmental regulations.
The Chairman of Major Oil Marketers Association of Nigeria (MOMAN), Mr Olumide Adeosun, who doubled as the facilitator, stated that the virtual workshop aimed at addressing key challenges and outlining strategies to ensure a sustainable future for the petroleum downstream sector.
He said safeguarding consumer interest in a deregulated environment was also significant, adding that the workshop provided data-driven insights into the sector’s growth potential.
“The importance of connecting to regional markets, positioning Nigeria as the regional refining hub, and fostering relationships with international service providers.
“Including rating agencies, finance and governance institutions, and aligning with the goals of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP), was reiterated at the workshop.
“Ultimately, this collaborative workshop provided a platform for stakeholders to share knowledge and develop strategies to ensure the Nigerian Petroleum downstream Industry remains a strong, competitive force while transitioning to a more sustainable future”, he added.
Fuel Subsidy: Nigeria Loses Trillions Of Infrastructure Development – NNPCL
The Nigerian National Petroleum Company Limited (NNPCL) has said Nigerians have missed enormous infrastructure development due to the protracted fuel subsidy regime in the country.
The NNPCL disclosed that the amount spent on fuel subsidy payment could provide 7,500km of road network at N400 million per kilometre and 37 well-equipped 120 Beds Tertiary Health Centres at N32 billion per hospital annually.
Senior Business Advisor to the GCEO, NNPCL, Mr Lawal Musa, disclosed this in Abuja at a joint National Association of Nigerian Students (NANS)/Civil Society Organisations (CSOs) sensitisation workshop on the NNPCL Operations.
Musa, in a presentation entitled “Petroleum Industry Act (PIA) and the Nigerian Economy’’, said the Federal Government spent as much as N4.8 trillion annually on fuel subsidy at the expense of the wellbeing of Nigerians.
In an analysis of the opportunity cost of the subsidy spending, he said deregulation could deliver 500,000 new houses and education and skill up of two million Nigerian students, among others.
He said it could deliver N12 trillion in four years to Nigeria while annual Premium Motor Spirit (PMS) under recovery would escalate to N3 trillion.
He said the cost of fuel subsidy outweighed the direct benefits particularly to the masses.
He further said deregulation could provide additional 27,000 megawatts of electricity to Nigerians and build and equip 2,400 hospitals in 774 LGAs.
“Nigeria is the largest producer of crude oil in Africa, possessing 28 per cent of Africa’s reserve, with petroleum contributing significantly to the country’s economy.
“The benefits derived have over the years been eroded due to the amount paid on subsidy, a regime has been fuelling the vicious circle of poverty in the country”, he said.
Musa explained that the PMS (fuel) was sold lowest price in Nigeria among most West African countries in spite of the average cost of $2.7 per litre globally, which amounted to up N570 per litre.
According to him, verifiable PMS demand data is critical to National planning and energy security.
In an overview of the PIA and New NNPCL structure, Mrs Oritsemeyiwa Eyesan, the Chief Strategy and Sustainability Officer, NNPCL, said the new entity was incorporated as a commercial company to be run like any other private company in the country, following the provision of the PIA 2021.
Eyesan, represented by Mr Vincent Ogbu, her Business Advisor said NNPCL’s activities were guided by three core values namely integrity, excellence and sustainability.
She explained that the signing of PIA into law overhauled the institutional, regulatory and fiscal framework for the Nigerian petroleum industry and provided structured approach for managing host community development and investments.
She further said significantly, the PIA mandated incorporation of old NNPC and established NNPCL as a fully commercial entity.
“Under the Act, NNPCL is to conduct affairs without recourse to government fund. The new NNPCL is being owned by 200 million Nigerians with Ministries of Finance and Petroleum Resources as major shareholders”, she said.
Earlier, the NNPCL Group Chief Communications Officer, Garbadeen Muhammad, said the NNPC was engaging with students as critical stakeholders in the new organisation which belonged to over 200 million Nigerians including the Nigerian students.
Muhammad said the engagement which would be done annually, was aimed to enlighten the students and CSOs on the NNPCL as a new entity registered by the Corporate Affairs Commission under the Company and Allied Matters Act.
Also speaking, the National President of NANS, Usman Barambu, thanked the NNPC for the enlightenment workshop which had exposed the students on the new structure and operations of the oil company.
Barambu urged the company to ensure availability of fuel and tackle fuel scarcity in the country as well as opening of opportunities for ordinary Nigerian graduates to gain employment in the company.
Chief Convener, Civil Society for Justice and Equity, Mr Olayemi Success, called for the removal of the fuel subsidy and urged government to channel the money towards improving the education sector.
Pipeline Vandalism: Stakeholders Opt For Mini-Grid Electeicity
Stakeholders have expressed commitment to provide Solar Mini-Grid Electricity to some communities without electricity in the Niger Delta to tackle pipeline vandalism and crude oil theft.
The Executive Director, Youths and Environmental Advocacy Centre (YEAC-Nigeria), an NGO, Mr Dumnamene Fyneface, said this in a telephone interview with The Tide’s source in Abuja.
He said YEAC-Nigeria and YEAC-UK Ltd engaged NXT GRID Netherlands and its Nigeria subsidiary to develop the project.
According to him, the project will commence from Umuolu community, Ndokwa East Local Government Area of the state, and will be extended to other communities.
He said the commitment was part of measures to address pipeline vandalism, crude oil theft and artisanal refinery pollution including soot in the state.
“The effort will reduce the use of illegally-refined petroleum products by communities which hitherto depended on the products, especially fuel for their generators and kerosene for their lanterns as energy sources.
“The project will also support the communities to power their homes since they do not have access to electricity.
“The project is expected to discourage oil theft, reduce fossil fuel extraction, fight environmental pollution and climate change while providing clean, renewable and affordable energy to households.
“Those other communities that are also hard-to-reach and have not had access to electricity for a long time will definitely benefit from the project being rolled out in phases”, he said.
Fyneface continued that the project would as well discourage those youths that were engaged in illegal artisanal refineries and other unauthorised activities, because people would no longer patronise them.
He said the development would provide job opportunities to the communities, thereby, giving them alternative livelihoods away from various environmental crimes.
“It will also provide the communities other business opportunities that the electricity can power through what we call `Productive Use,’ thus reducing environmental pollution.
“It will also help in the fight against climate change as the communities that are engaged in such illegal activities will have their minds disabused”, he stated.
Fyneface said the Productive Use was a project meant to support the youth, women and persons with disabilities by providing grants, soft and revolving loans to the community.
He said the essence of the project was to assist the people by engaging them in various businesses using the renewable energy system.
According to him, the objective of the organisation is to reduce pipeline vandalism, crude oil theft, artisanal refining and environmental pollution.
“The organisation tries to discourage families from patronising illegally refined petroleum products as energy sources to power their homes through generators, thereby, making artisanal refineries unattractive.
“We believe that if we can provide alternative livelihood opportunities for artisanal refiners, pipeline vandalism, artisanal refining and associated environmental pollution will automatically be reduced.”
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