Nigerian oil marketers have declared that the controversial oil subsidy regime terminated by the President Tinubu administration has made a comeback barely five months later.
With the rise in the landing cost of petrol, the Nigerian National Petroleum Company (NNPC) Limited has said it has no intention of increasing the pump price of petrol, also known as premium motor spirit (PMS), at its retail outlets, thus substantiating reports of a partial subsidy regime.
This is as petrol marketers have expressed disapproval at the monopoly in the supply of the product into the country, even as they confirmed that subsidy has crept in following the government’s intervention.
There have been speculations on social media that the oil company plans to raise the petrol pump price to over N700 a litre. However, in a statement on Thursday, NNPC’s retail subsidiary said it had no plans to raise the price of the product.
“Dear esteemed customers, we at NNPC Retail value your patronage, and we do not have the intention to increase our PMS pump prices as widely speculated,” the statement reads.
Please buy the best-quality products at the most affordable prices at our NNPC Retail Stations nationwide.”
The national oil company had adjusted the petrol price in May 2023, following a pronouncement by President Bola Tinubu that the subsidy regime was over. In July, the price of the commodity rose further to N617 per litre in the federal capital territory (FCT) and N568 in Lagos.
Speaking on the issue, Mele Kyari, the group chief executive officer (GCEO) of the NNPC, blamed market forces for the price increase.
However, the marketers said NNPC should not be the sole importer of petrol into the country considering the provisions of the Petroleum Industry Act (PIA).
“First of all, we need to get out of the bottleneck we have created for ourselves, in which the NNPC is the sole importer of fuel into Nigeria,” said Tunji Oyebanji, MD/CEO of 11 Plc, said at the annual conference of the Association of Energy Correspondents of Nigeria in Lagos.
Oyebanji, a former chairman of the Major Oil Marketers Association of Nigeria (MOMAN), said the NNPC’s monopoly has to be broken.
“The monopoly of a single supplier in the country needs to be dismantled because it’s inefficient and not sustainable.”
On May 29, President Bola Tinubu announced the removal of petrol subsidy – a development that led to an increase in the pump price of the product from N186 per litre to over N500. The price was further raised in July to as high as N617.
The subsidy removal coupled with a foreign exchange reform that led to a sharp devaluation of the naira in mid-June 2023 was expected to encourage private marketers to join the NNPC in petrol importation. One or two operators brought in the product but the government’s announcement that pump prices would not increase further amid rising global oil prices and naira devaluation put a damper on marketers’ efforts to import the product.
“We have to find ways of bringing other players into the importation business so that there’s competition and efficiency. Then we need to look at the whole logistics chain,” Oyebanji said.
“Today, there may be three or four facilities that can take vessels of the size of 120,000 metric tonnes. If we have more of those kinds of facilities, we will bring larger vessels into the country,” he added.
He said the regulators should be careful not to take actions that go against the PIA. According to him, the PIA has established that petroleum prices have to be fixed or determined by market forces.
“That is the law, and it is very clear,” he said.
Since the last increase in the pump price of petrol in July, the price of the product has been held constant, despite the rise in global oil prices which has pushed the pump price of diesel to over N1,000 from about N640-N700 in July.
In August, Tinubu assured Nigerians that there would be no increase in the pump price of petrol anywhere in the country.
“Is there still subsidy? I will say yes, in some areas,” Clement Isong, executive secretary of MOMAN, said during a panel session at the event. “The subsidy, as it was, must never come back.”
He said while the government can intervene, the intervention should be clear and time-bound.
According to him, higher prices should force PMS consumers to be more efficient and the operators to look for innovative ways of pushing down their costs to be competitive in the market.
“If the pump price of petrol had stayed at N185 per litre today with the current global oil prices, Nigeria would have collapsed,” Isong said. “So the subsidy is much less than it used to be, but for us to get to where we want to be, we must make some adjustments.”
He said the adjustments would be in the area of infrastructural and operational investments.
“This will have an impact on working capital and cost of funds and we still have local investments to make in respect to public health awareness and safety.”
The MOMAN position is coming on reports that many petroleum products depots are currently deserted due to lack of products caused by foreign exchange rate volatility, as the landing cost of Premium Motor Spirit has increased to N720/litre.
Petroleum products’ dealers also stated that filling stations were closing down as it was becoming increasingly tough to run the business which could lead to widespread fuel scarcity in coming months.
Speaking at the National Executive Council meeting of the Natural Oil and Gas Suppliers Association of Nigeria, in Abuja on Thursday, the national president of NOGASA, Benneth Korie, said a lot of depots are presently dry or out of stock.
Also, chief executive officer, Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, disclosed the federal government’s commencement of moves to ensure drastic reduction in cost of crude oil production.
He said the commission is committed to ensuring significant reduction in cost of doing business in the upstream petroleum industry.
“Following in-depth comparative analysis between Unit Operating Cost (UOC) in Nigeria and those obtainable in other climes, we have commenced the development of cost studies and benchmarks, to ensure improvement in cost efficiency of our upstream petroleum operations, in accordance with Section 8 of the Petroleum Industry Act 2021(PIA),” he said.
