The Nigeria National Petroleum Corporation Limited has vowed to comply with existing governance framework in the importation of Premium Motor Spirit (PMS), also known as petrol or gasoline. The agency assured stakeholders on the participation of relevant government agencies in all PMS discharge operations, including Nigerian Ports Authority, Nigerian Midstream and Downstream Petroleum Regulatory Authority, Nigerian Navy, Nigeria Customs Service, among others. Assistant Business Editor COLLINS NWEZE reports that the move aligns with NNPCL’s commitment to transparency, accountability and fiscal discipline in PMS imports and support for domestic economy.
Nigeria is one of the countries in the world where the power of petrol or Premium Motor Spirit (PMS) on the daily lives of its citizens cannot be overemphasised. From transportation, manufacturing, power generation to running of small and medium enterprises operational equipment, PMS has come to represent the soul of Nigeria’s productive economy.
In the face of delinquent refineries, the Nigeria National Petroleum Corporation (NNPC) Limited has, for years, been at the centre of ensuring that PMS is made available to individuals, businesses and manufacturers to ensure smooth running of the economy. This explains why the NNPC Limited has assured that it will remain transparent, and follow global best practices in the supply of PMS to the economy. The agency also stated that between January and August 2022, the total volume of PMS imported into the country was 16.46 billion litres, which translates to an average supply of 68 million litres per day. Similarly, import in the year 2021 was 22.35 billion litres, which translated to an average supply of 61 million litres per day.
The NNPC Ltd noted that the average daily evacuation (Depot truck out) from January to August 2022 stands at 67 million litres per day as reported by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). Daily Evacuation (Depot load outs) records of the NMDPRA carry daily oscillation ranging from as low as four million litres to as high as 100 million litres per day. The NNPC also pointed out that rising crude oil prices and PMS supply costs above PPPRA (now NMDPRA) cap had forced oil marketing companies’ (OMCs) withdrawal from PMS import since the fourth quarter of 2017.
“In the light of these challenges, NNPC has remained the supplier of last resort and continues to transparently report the monthly PMS cost under-recoveries to the relevant authorities. NNPC Limited also notes the average second quarter, 2022 international market determined landing cost was $1,283/MT and the approved marketing and distribution cost of N46/litre,” it said.
The combination of these cost elements translates to retail pump price of N462/litre and an average subsidy of N297/litre and an annual estimate of N6.5 trillion on the assumption of 60 million litres daily PMS supply. This will continuously be adjusted by market and demand realities. The Group General Manager, Group Public Affairs Division, NNPC Ltd., Garba Deen Muhammad, said NNPC Ltd will continue to ensure compliance with existing governance framework that requires participation of relevant government agencies in all PMS discharge operations, including Nigerian Ports Authority, Nigerian Midstream and Downstream Petroleum Regulatory Authority, Nigerian Navy, Nigeria Customs Service, NIMASA and all others.
“NNPC Ltd recognises the impact of maritime and cross border smuggling of PMS on the overall supply framework. NNPC also acknowledges the possibilities of other criminal activities in the PMS supply and distribution value chain. As a responsible business entity, NNPC will continue to engage and work with relevant agencies of the Government to curtail smuggling of PMS and contain any other criminal activities.
“We will continue to deliver on our mandate to ensure energy security for our country with integrity and transparency. We invite any forensic audit of the PMS supply and subsidy management framework of the NNPC,” he said.
The Controller-General of the Nigeria Customs Service (NCS), Col. Hameed Ali (Rtd), had faulted the daily consumption figures of petrol claimed by the NNPC Limited to justify the over N6.34 trillion subsidy payment on the product annually. He spoke while making a presentation to the House of Representatives Committee on Finance at the continued hearing on the proposed Medium-Term Expenditure Framework and Fiscal Strategy Paper (2023 to 2025) in Abuja. Ali wondered why the NNPC Limited said that the daily consumption figure of petrol is 60 million litres and then allowed 98 million litres to be lifted daily from the depots.
But analysts said payment of petrol subsidy has been a major drain in the resources of Nigeria and allegedly become a conduit pipe for the siphoning of public funds into private pockets. The subsidy payment is necessitated by Nigeria importing all of its petrol needs because the local refineries have not been working for several years, with Africa’s largest oil producer unable to benefit from the high crude oil prices because they are used to pay for the product.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, had over a week ago, said that Nigeria could be spending up to N6.72 trillion in 2023 on petrol subsidy if it is not removed, which is a 68 per cent increase when compared to the N4 trillion that was appropriated for petrol subsidy in the 2022 budget.
Ending petroleum products importation
Analysts said Nigeria will overcome its PMS challenges as it ends petroleum products importation by June 2023. Martins Stevens, a petroleum merchant based in Lagos, said he was excited after the Group Chief Executive Officer (GCEO) of the Nigerian National Petroleum Company (NNPC) Limited, Mallam Mele Kyari, announced that the country would end importation of petroleum products by June 2023. Stevens said the planned coming on stream of the Lagos-based 650,000 barrels per day Dangote Refinery under construction would start producing petrol by the middle of next year, with a capacity of 50 million litres daily is a good development for the country.
Continuing, Kyari said NNPC owns 20 per cent of the Dangote Refinery and has first right of refusal to supply crude oil to the plant. The NNPC Limited boss said that the Lagos-based 650,000 barrels per day Dangote Refinery under construction would start producing petrol by the middle of next year, with a capacity of 50 million litres per day. He added that, “the combination of that and our ability to bring back our refinery will eliminate any importation of petroleum products into this country next year. You would not see any importation into this country next year.
“This is very practical. As a matter of fact, when we are done with our own refineries and the Dangote refinery, there remain other small initiatives that we are doing, small modular condensate refineries that we are building. If that happens and we are very optimistic it will happen, you would see that this country will now be a net exporter,” he said.
NNPC privatisation/ independent businesses
An expert in the oil and gas sector, Henry Abiodun, said the privatisation of NNPC would enable it negotiate with independent businesses and source for deals, and entrench more disclosures on how its operations are run. The new business opportunities springing up in the energy sector are all fallout of the NNPC privatisation, which has boosted local and global investors’ commitment to the economy. Abiodun said NNPC is now independently run, and will open its book more now to the public like its peers, Brazil’s Petrobrass, Saudi’sAramco, and other publicly-quoted national oil firms do. The transition would enhance competitiveness and lead to the gradual phase-out of petroleum subsidy.
Significantly, the migration to a limited liability company followed provision of the Petroleum Industry Act (PIA). Given the obstacles clogging the defunct Nigerian National Petroleum Corporation (NNPC), stakeholders clamoured for reforms to induce profitability, transparency and overall development. Hence, the signing of the PIA in 2021. Section 53 (1) of PIA 2021 requires the minister of Petroleum Resources to cause the incorporation of NNPC Limited within six months of the enactment of PIA in consultation with the minister of Finance on the nominal shares of the company.
In September 2021, the Corporate Affairs Commission (CAC) completed the incorporation of NNPC. NNPC Limited now operates “free from institutional regulations, such as the Treasury Single Account, Public Procurement, and Fiscal Responsibility Act.” Section 53 (5) of the Act stipulates that shares of the company held by the government are not transferable or mortgaged unless approved by the government and National Economic Council. It further stated that by way of securitisation, any sale or transfer of shares of NNPC Limited shall be at a fair market value and subject to an open, transparent and competitive bidding process. The sale or transfer of shares shall be on an equal proportion basis of shares held by the Ministry of Finance Incorporated and the Ministry of Petroleum Incorporated. Expectedly, energy experts and other stakeholders believe that NNPC’s transition would continue to heighten demand for transparency and accountability in its operations.
Economic outlook remains positive
With NNPC’s support for the economy, ongoing growth seen in key sectors of the domestic economy will be sustained. According to the National Bureau of Statistics (NBS), Real Gross Domestic Product (GDP) grew by 3.11 per cent (year-on-year) in the first quarter of 2022, compared with 3.98 per cent in the fourth quarter of 2021 and 0.51 per cent in the corresponding period of 2021. The economy has thus grown for six consecutive quarters, following its exit from recession in 2020. Other analysts projection showed that the economy is expected to remain on a path of sustained positive growth observed in the last few quarters. There is also the continued effort by both the monetary and fiscal authorities to dampen price pressures and sustain the recovery of output growth.
Also, despite the challenge facing the oil industry and economy, Central Bank of Nigeria (CBN) Director of Research, Michael Adebiyi, said the fiscal outlook in the near-term is modestly optimistic. For him, the imposition of new EU sanctions on Russia would continue to rally oil prices, thereby boosting oil earnings, albeit after tackling the constraints to crude oil production. Speaking during the Chartered Institute of Bankers of Nigeria (CIBN) mid-year review of economic outlook in Lagos, he said fiscal vulnerability remains elevated with rising public debt and debt service payments, which could dampen the positive effects of the oil revenue inflow. “The prospect of fiscal policy in the near-term is mixed, as the tailwinds favour strong non-oil revenue performance, while downside risks are tilted towards the paradox of low oil revenue amidst attractive crude oil prices due to theft, vandalism of oil installations, and delay in petrol subsidy removal, which would continue to weigh on potential earnings from crude oil exports,” he said.
Looking ahead, the outlook for domestic growth, for the rest of the year, is positive as the Nigerian economy is projected to maintain its upward trajectory on the back of policy support and rebound in crude oil prices. Specifically, the Nigerian economy is forecast to grow in 2022 by 3.33 per cent (CBN), 4.20 per cent (FGN) and 3.40 per cent (IMF). The positive outlook is predicated on the effective implementation of the 2022 National Budget and the Medium-Term National Development Plan (MTNDP), and the positive impact of CBN interventions on growth-enhancing sectors.