NNPC: N145 fuel pump price unrealistic

…signs swap agreement with BP
…denies $3.5bn under recovery fund

The Nigerian National Petroleum corporation (NNPC) yesterday
said that the current pump price of N145 of Premium Motor Spirit or
Petrol was unrealistic. It said that no marketer would want to
import fuel and sell at that cost.

That was as the Senate gave the Corporation a two-week ultimatum
to furnish it with all the documents pertaining to how it has
utilized the $1.05 billion (or N383.2 billion) National Fuel
Support Fund it set aside since October 2017 to date. The Senate
gave the ul-imatum in Abuja, at an investigative hearing on the
$3.5 billion Subsidy Under-recovery Fund, allegedly created by the
NNPC and solely managed by its Group Managing Director and the
Executive Director, Finance.

The apex legislative chamber had, on October 16, 2018, set up a
15-member ad-hoc Committee to carry out the investigation,
following a point of order raised by the Senate minority leader,
Senator Abiodun Olujimi, alleging that the Corporation created a
fund to finance fuel subsidy without appropriation by the National
Assembly.

However, responding to questions from the members of the ad-hoc
Committee, the Group Managing Director of the NNPC, Mr. Maikanti
Baru, said that there was no such fund, but admitted that what the
Corporation set aside was $1.05 billion to augment the differential
between the landing cost of imported fuel and the pump price of
N145 per litre. He told the Panel that the landing cost of
petroleum product was N185 per litre, which left a gap of N40
differential; pointing out that the gap was being filled with the
$1.05 billion Support Fund. Baru also said that the current pump
price of N145 per litre of fuel was unrealistic, and that as long
as the Federal Government continued to peg the price of petrol at
this rate, the NNPC would remain the sole importer of the product
because the independent marketers would not import and sell at a
loss. The GMD further observed that the pump price of N145 was the
lowest in the whole of West Africa, lamenting that it was the main
reason smuggling was thriving well in the country.

“The N145 per litre pump price of PMS in Nigeria is the lowest
when compared to N400 it is sold in Cameroon, N350 in Ghana, N330
in Benin Republic etc. “As long as the product is sold at the
lowest price in Nigeria, so shall it be attractive for smugglers to
trade on across the borders”, he complained. He said: “Based on
available parameters from landing to transportation costs, the pump
price of PMS is supposed to be N185 per litre as against the
official price of N145 per litre, indicating shortage of N40 per
litre. “Since subsidy is not appropriated and pump price not
adjusted upwardly, NNPC had no other reason than to, in line with
its establishment Act, section 7 sub section 4(b), defray its costs
from its revenues”. He explained further that the $1.05billion
costs augmentation fund was set up in October 2017, when
Independent Marketers pulled out of the supply chain of importation
of PMS into the country as a result of increase in landing cost
without corresponding increase in pump price.

He stated that the issue of subsidy or pump price increase could
best be addressed by the National Assembly and not the NNPC,
failure of which, he said, would make smuggling of petroleum
products across Nigerian borders, lucrative business for those in
the business. He, however, told the lawmakers that he did not know
the daily consumption of the product in Nigeria presently, but
disclosed that the consumption rate as at 2016 was 49 million
litres per day and 53 million litres per day in 2017. According to
him, the NNPC presently has 1.9 billion litres of PMS in stock,
which could last the country for 39 days in case of any breakdown
in the supply chain.

Baru’ s appearance before the committee was sequel to a
resolution taken by the Senate on October 16 for probe into alleged
warehousing of $3.5billion by NNPC for fuel subsidy through a
motion moved by the Senate Minority Leader, Biodun Olujimi (PDP
Ekiti South). Apart from Baru, officials of government from the
Ministry of Finance, Office of Auditor-General of the Federation
etc, also appeared before the committee. In his submission, the
Permanent Secretary, Federal Ministry of Finance, Mr. Mahmoud
Isa-Dutse, said that the Ministry did not know anything about the
alleged $3.5 billion subsidy, stressing that the Ministry did not
keep subsidy account.

“Ministry of Finance does not handle subsidy account. So, we
don’t have any information on the said $3.5 billion. The NNPC
imports and sells fuel; so, it is not under the purview of what we
do”, he said. The Committee, chaired by the Leader of the Senate,
Ahmed Lawan ( APC Yobe North) , had, however, adjourned its sitting
to Tuesday, November 6, 2018.