Kyari to consumers: Be prepared, N120bn fuel subsidy monthly no longer sustainable

March 25, 2021
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Kyari

Group General Manager Nigerian National Petroleum Corporation (NNPC) Mele Kyari has said the federal government spends between N100 billion and N120 billion monthly to subsidy the pump price of Premium Motor Spirit (PMS) for Nigerians.

Speaking Thursday at a special ministerial briefing coordinated by the Presidential Communication Team at the State House Abuja, Kyari said the subsidy was being paid by the NNPC and reflected in its financial books.

He said while the actual cost of importation and handling charges of refined PMS amounts to N234 per liter, the NNPC sells at N162 per liter.

The NNPC boss also said the NNPC can no longer afford to bear the subsidy cost, stressing that sooner or later; Nigerians would have to pay the actual cost of PMS.

Today, NNPC is the sole importer of PMS, we are importing at market price and we are selling at N162 per litre to day. Looking at the current market situation today, the actual price could have been anywhere between N211 to around N234 to the litre.

“The meaning of this is that consumers are not paying for the full value of the PMS that we are consuming and therefore, someone is bearing that cost. As we speak today, the difference is being carried on the books of the NNPC and I can confirm to you that the NNPC may no longer be in the position to carry that burden and because we can longer afford to carry it on our books.

“As we speak today, I will not say we are in subsidy regime but we are in a situation where we are trying to exit this under price sale of PMS until we come to terms of the full value of the product in the market.

“PMS sells across our borders anywhere around N300 to the liter and in some places up to N500 to N550 to the liter. Our current consumption is evacuation from the depots about 60 million liters per day, we are selling at N162 to the liter, and the current market price is around N234, actual market price today.

“So the difference between the two, multiplied by 60 million x 30 will give you per month. I don’t have the numbers now, this is a simple arithmetic  that we can do but if you want exact from our books, I do not have it at this moment but it’s anywhere between a hundred billion and up to 120 billion naira per month. I don’t have the exact number,” he said.

He said upon the full deregulation of the oil sector, marketers would begin to import PMS thereby taking the burden off NNPC and bringing direct-sale-direct-purchase (DSDP) programme to an end.

He said the NNPC uses a direct-sale-direct purchase mechanism to secure the country’s gasoline requirements in exchange for crude oil.

“Upon the full implementation of the deregulation, we expect that all oil marketing companies to commence import even now so that that burden of import will be taken away from the NNPC or even the supply for when local refinery is made available so that NNPC will not be sole supplier of PMS into this market. So, once this situation arises, you are sure that the a direct-sale-direct-purchase (DSDP) programme will automatically vanish because, you will have no further need for it because market forces will now determine the import and export.

“We know there’s one major challenge why oil marketing companies have not started importing which is around access to foreign exchange and we are working on this with the Central Bank of Nigeria and as soon as that is available, oil marketing companies will also resume import of petroleum products,” Kyari said.

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