The Nigerian National Petroleum Company Limited and fuel
marketers under the aegis of the Independent Petroleum Marketers Association of
Nigeria, on Tuesday, clashed again over the removal of subsidy on petrol.
This came against the backdrop of the depreciation of the
naira against the United States dollar at both the official Investors &
Exporters Window and the parallel market.
On Tuesday, the local
currency closed at 998/dollar at the official market, while it traded at
1,225/dollar at the black market.
On the back of the falling naira rate, economists and oil marketers said PMS subsidy was increasing in recent times, but the NNPC quickly countered these positions and declared that it was recovering its full cost on the importation of Premium Motor Spirit, popularly called petrol
The Chief Executive Officer, Financial Derivatives Company,
Bismarck Rewane, had during a live television programme on ChannelsTV on
Sunday, explained that fuel subsidy was not removed but reduced.
Similarly, oil marketers told our correspondent on Tuesday
that subsidy on petrol was increasing considering the crash of the naira
against the United States dollar and the cost of crude oil, stressing that PMS
should sell for N1,200/litre in a free market.
Petrol, which is solely imported into Nigeria by the NNPCL,
currently sells for between N617/litre to N660/litre, depending on the location
of purchase in Nigeria.
Also speaking on the matter, the Chief Executive Officer,
Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said there was
partial subsidy on petrol, but noted that the commodity was subsidised by the
government for political, social and economic reasons.
Full cost recovery
But when contacted, the Chief Corporate Communications
Officer, NNPCL, Olufemi Soneye, described the positions of economists and
marketers as assumptions, and insisted that the Federal Government had stopped
subsidy on petrol.
President Bola Tinubu had during his inaugural speech on May
29, 2023, declared that subsidy on petrol was gone, a declaration that was
effectively implemented the next day by NNPCL.
Before Tinubu’s declaration, the pump price of petrol was
below N190/litre, but it jumped to over N500/litre after the President’s
statement, and moved up again to over N600/litre a few weeks later.
Asked to state if the NNPCL, being Nigeria’s sole importer
of petrol, subsidising the commodity as posited by dealers and experts, the oil
firm’s CCCO replied, “We prioritise our time on substantive matters rather than
responding to assumptions.
“At NNPC Ltd, we prioritise national development through
energy security and sustainable growth. We reiterate that the Nigerian
government does not pay subsidy on fuel; we recover full costs from our
imported products.
“As a global energy company, our focus remains on fostering
a vibrant and energy-secure Nigeria.”
‘Subsidy reduced’
Rewane had earlier explained that subsidy on petrol was
reduced and not removed, while featuring on a live television programme on Sunday
evening, as he further highlighted the effects of the reduction in fuel subsidy
and how it was affecting salary earners in Nigeria.
He said, “At the inauguration, it was said that (fuel)
subsidy was gone but subsidy was actually reduced.”
Buttressing his position, he explained, “There is the
convergence of exchange rates and reducing the windows into one. The
consequence of that is that money has been transferred from consumers to the
government.
“Subsidies are reversed taxes; if you reduce them, you
increase the people’s taxes and reduce their income. What has happened is that
government revenue has increased by 44 per cent between May and June (2023).
Money has been transferred to the government but what is the government doing
with it?
“The consumers, on the other hand, had a minimum wage, which
in dollar terms was $40 in 2002. In 2019, it was about $70, but it has now been
reduced to $24.”
Marketers project
N1,200/litre
The National Public Relations Officer, Independent Petroleum
Marketers Association of Nigeria, Chief Ukadike Chinedu, stated that subsidy on
petrol was rising and that the cost of the commodity should be around
N1,200/litre in a free market.
“To be pragmatic in this analysis let’s consider the cost of
petrol today in the United States. For premium petrol, it is $2.99, while super
petrol sells for $3.15 or $3.10 depending on the part of that country where you
are making the purchase.
“Now, $3 in Nigeria is over N3,000, because a dollar in the
parallel market is over N1,000. You can also see the cost of diesel, that is
over N1,000/litre, and it is important to state that petrol is usually higher
in price than diesel in a free market.
“So if you consider the cost of diesel, dollar and other
international factors, the price of petrol in Nigeria should be around
N1,200/litre, but the government is subsidising it, which to an extent is
understandable,” he stated.
Ukadike noted that he had earlier explained that the
government was implementing quasi-subsidy, and by this it means that “the
Federal Government, instead of taking out the subsidy by 100 per cent, decides
to take out about 50 per cent.”
The IPMAN official, however, expressed optimism again that
the cost of refined petroleum products would reduce as soon as the Port
Harcourt and Dangote refineries start producing the commodities.
The lead pastor of the Trinity House Church, Lagos, Ituah
Ighodalo, has revealed that one of his daughters has warned him against
remarrying.
All of a sudden, Inspector Jonathan Okouromi just lifted his
gun, pulled the trigger and shot Akhere from the back. Nobody knew what
happened
“I also believe that
there will be a reduction in the prices of petroleum products this year when
you consider what the government is currently doing. The coming onboard of the
Port Harcourt refinery and the supply of crude to Dangote refinery are good
developments in the sector.
“Their operations will help stabilise the price of PMS and
other petroleum products in Nigeria, because it will definitely cut down the
importation of products,” Ukadike stated.
Social, economic
reasons
The Centre for the Promotion of Private Enterprise CEO said
subsidy was being retained partially because of its economic, social and
political implications.
Yusuf said, “To protect the citizens from further hardship
is the reason why the government seems to have applied the brakes on subsidy
removal. We are all witnesses to the pain and hardship that citizens are going
through.
“So when you are adopting some of these policies, especially
these liberal economic policies, it comes to a point where you have to moderate
your position for social reasons.
“Just as the World Bank said, if we want to leave the price
fully to market forces and the liberal economic policies, the fuel price will
be above N800/litre. Can any government that is sensitive to the feelings of
its citizens allow that to happen?
“Even if economically that is the way to go, there must
always be a human face to economics. So what the government has done is to
moderate the reform, and that is why I think the government has insisted that
the NNPC should still hold the price at the current level.”
Yusuf noted that the government must balance the gains and
side effects of subsidy, stressing that economic hardship may worsen should
subsidy be removed 100 per cent.
“All of us who were saying that they should remove the
subsidy, we can see that they have partially removed it now, but look at the
consequences. Economically it will sound good, but socially and politically it
is very costly.
“So those in government need to balance all those
considerations. They need to balance economic, political and social
considerations. That is why we find ourselves in a situation where we have
partial subsidies, both in petrol and electricity,” he stated.
The World Bank had stated in December that subsidy on petrol
was still being implemented by the Federal Government, as it insisted that the
cost of PMS should not be less than N750/litre if there was no subsidy.
Naira at N988/$
The naira closed at N988.46/$ on the first day of official
trading on the Investors and Exporters Window on Tuesday.
This is an 8.97 per cent decline from the N907.11/$ it
closed trading on Friday (the last day of official trading for 2023) according
to data from the FMDQ Securities Exchange. This continues a worrying trend for
the naira which was one of the worst performing currencies of 2023.
According to Bloomberg, the naira had one of its worst years
in 2023, a title that 2024 might usurp. It noted that the national currency
lost about 55 per cent of its value as of Thursday 28, 2023.
Based on Kyle Chapman, FX markets analyst at London-based
Ballinger & Co, the naira was the third worst-performing global currency in
2023 due to a backlog of unsettled forwards, undelivered promises of dollar
inflows, and a two-decade peak in inflation.
Chapman said, “The naira’s downward momentum is likely to
continue through much of 2024, and its ultimate trajectory will depend on
whether the CBN’s rhetoric transforms into concrete policy moves that drive up
the flow of US dollars into Nigeria and shore up trust in the official market.
“If the CBN’s
promised measures materialise and Tinubu’s government enacts structural changes
to increase oil production or to drive foreign investment, there is plenty of
opportunity for the naira to lift from its record lows. But a quick fix is
unlikely, and further depreciation will come to counteract supply and demand
imbalances.”
In its December Nigeria Development Update, the World Bank
noted that naira had depreciated against the US dollar by 41 per cent in the
official market and by 30 per cent in the parallel market. It noted that the
naira needs increased volume to stabilise in the official market.
It said, “Further monetary policy tightening is expected to
help underpin the value of the naira. However, there is also a need to increase
FX supply in the market. Facilitating FX flows, especially from all exports,
through the NAFEM can help provide additional volumes in the official window
that can help provide stability.
“In addition, clarity on the CBN’s net reserve position, and
on the CBN’s continued progress in clearing the FX backlog, would also
strengthen market confidence.”
NNPCL records thefts
Meanwhile, the Nigerian National Petroleum Company Limited,
on Tuesday, said a total of 112 cases of crude oil theft were recorded in the
Niger Delta in one week.
It said the oil theft incidents occurred between December
23, 2023 and December 29, 2023, adding that in the past week, 42 illegal
refineries were discovered in several locations in the oil rich region.
It outlined the locations to include Konsho and Tebidaba in
Bayelsa State; Obokofia in Imo State; as well as Ogidigben, Mereje and Obodo
Omadina, in Delta state
The oil firm disclosed this in a documentary posted on its
official X handle, adding that the “illegal refineries in Umuire, Abia State,
and Upata in Rivers State, were also discovered and destroyed.”
It further stated that 14 illegal connections were uncovered
in several parts of the Niger Delta, as a tunnel covering an illegal connection
was also uncovered in Owaza, Abia State, while 10 cases of vandalism were
discovered.
In the two minutes and 44 seconds documentary, the company
stated that, “Illegal storage sites were discovered in Ebocha and Ton Kiri in
Rivers State where oil pits were found.
“In Ogbia, Bayelsa State, sacks of crude oil were
discovered. More illegal storage sites were uncovered in Urhonigbe, in Edo
State; Ekuku-Agbor and Bomadi in Delta State.”
According to the firm, 22 wooden boats conveying stolen
crude were discovered in Okrika and Tombia in Rivers State as well as Emereje,
Delta State.
It stated that during an operation, 11 vehicle arrests were
made in Delta State, as eight of these (oil theft) incidents took place in the
deep water, 46 in the eastern region, 32 in the central region, while 26 took
place in the western region.
“Between the 23rd and 26th of December, 2023, 18 suspects
were arrested,” the national oil company stated, adding that it would not back
down in the war against crude oil theft.
Nigeria loses billions of naira to oil theft and finds it
tough to meet the production quota approved for the country by the Organisation
of Petroleum Exporting Countries, due to the menace of oil thieves.
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