FG proposes two fuel prices, wants NNPC, independent marketers to sell differently

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As a way of solving the lingering fuel scarcity in the country, the Federal Government is considering an arrangement that would see the Nigerian National Petroleum Corporation, NNPC, sell a litre of petrol for N145 while independent marketers would import and dispense at their own rate.

The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, who made this known while appearing before the Senate Committee on Petroleum Downstream, stated that the current petrol scarcity might linger till June 2019, when government-owned and private refineries would fully come on stream.

His words, “all I can say is that there are lots of issues. The major players stopped importation because of the price difference in landing cost. Once that happened, NNPC started providing 100 per cent products to the local market.

“There are issues on ground. Some are due to non-payment. Whenever situations like this arise, other issues arise. People moved products to other countries and decided to hide the products. We had to move in and release these products.

“What this says, for me, is that the business model of oil is not where it should be. If the prices of refined products escalate internationally, we do not react when we should. When it increases internationally, it has its own effects here. Between now and 2019 when our refineries will start working, we will have to rely on importation.”

Other recommendations proffered by Kachikwu as possible solution to the fuel crisis, which peaked during the Yuletide, include: a special foreign exchange price modulation as well as special tax consideration for independent oil marketers to reduce their financial burden.

The minister argued that if any of the three recommendations was adopted, fuel scarcity would be temporarily handled until refineries come on stream.

Butressing the three recommendations, he said: “During the 18 months emergency period, we need to look at pricing. We need to find a way to get marketers back to importation. Landing cost is about N170-175. We sell at N145. We need to address this problem. There are series of items. But the key item is the international selling price for sale of refined product.

“There is a gap. How do we deal with the gap? Whatever we do, we need to free the marketers to do their business. Exchange rate was N145 when price was tagged  in 2015. One model is for the CBN to create a special exchange rate for independent oil marketers to import their products. This will help.

“Is there a way to grant tax holiday for them? Government can look into the taxing system. If they do that, marketers will have more funds to import products.  Potential of having a plural pricing system? That is, NNPC outlets can sell at N145, while independent marketers can import at their rate and sell at their own rate. Until we deal with this issue, we will not get out of the problem.

“We have not been able to deal with the issue of border policing. It is still more lucrative to sell this product outside the country. I am proposing that trackers be placed on trucks leaving the depots. That is one way to deal with this issue.”

Kachikwu also called for a better border policing, arguing that since it was more lucrative to sell the premium motor spirit, PMS, better known as petrol in neighbouring countries, marketers will likely divert their products to those places.

He insisted that “what this country needs is to ensure that the refineries work. It is shameful that after more than 50 years, we still do not have working refineries. Selling crude is like selling raw agricultural materials. Once the private refineries start working, this scarcity issue will be behind us. Before we get there, we have 18 months to manage this problem.”

Kachikwu, who was accompanied by the Group Managing Director, GMD, of the Nigerian National Petroleum Corporation, NNPC, Mr. Maikanti Baru and other officials of his ministry, on behalf of President Muhammadu Buhari, apologised to Nigerians for the difficulties they went through  over the fuel scarcity during the festive seasons.

“Our sympathies go the Nigerian people. I will not say much,” he said.

Baru, however, had a different explanation, as he told the Senate committee that “false media reports” that the Federal Government was planning to increase price of PMS was responsible for the crisis.

He claimed that 4,500 trucks loaded with PMS had been diverted within the period, a development which he said aggravated the continuous scarcity.

The GMD said NNPC was yet to get a mandate to increase pump price, but did not rule out any possible future increment.

“NNPC has not been given any mandate to increase price. PPPRA has not been given any mandate too to increase the price of PMS. Independent marketers withdrew from importation of PMS since October. NNPC took over the importation of PMS 100 per cent in October.

“Consumption is about 27 million litres a day, but for logistics purpose, we make provisions for 35 million litres. We had products that would have lasted for 23 days all through the Christmas period. But people went into panic buying. About 4,500 trucks loaded with PMS were diverted during this period.”

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