The Nigerian government stopped subsidising the price of premium motor spirit (PMS), popularly called petrol, because subsidy had over the years been a drain on public finances, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, has again said.
Mr Kyari spoke on Tuesday at the opening ceremony of the African Refiners’ Association (ARA) Week 2020 held under the theme: “Towards Cleaner Fuels for Cleaner Air.”
The NNPC Chief delivered a keynote address to the meeting titled, “Vision for the Downstream Sector on the Continent”.
NEITI audits and fuel subsidies
The Nigerian Extractive Industries Transparency Initiative (NEITI) audit report revealed that between 2009 and 2011 alone, over N3 trillion was spent on fuel subsidy by the government.
Details of the report showed fuel subsidy payment increased by 71 per cent from N406 billion in 2009 to N695 billion in 2010, and by 174 per cent to N1. 9trillion in 2011.
For the corresponding period, the NEITI report said subsidy payments by the NNPC alone rose by 110 per cent, from N198 billion in 2009 to N416 billion in 2010, and 89 per cent to N695 billion in 2011.
The report said while the Office of the Accountant-General of the Federation said about N2.83 trillion was paid as fuel subsidy for the period, the Petroleum Products Pricing Agency (PPPRA), the government agency that monitors and regulates petroleum product prices, claimed about N3.002trillion was approved for payment to marketers and the NNPC.
The figures from both agencies showed a disparity of about N175.9 billion in the claims of payment for fuel subsidy for the period.
Also, in 2018, the NEITI audit said Nigeria’s payments on fuel subsidy rose by over 210 per cent from N722.3 million per day in March 2018 to N2.4 billion per day in May, amid rising fiscal deficits and growing debts.
Case for deregulation
Making a case for an end to fuel subsidy in the country, the NNPC GMD said the deregulation of the downstream sector of the oil and gas industry would ensure competition, increase investment in the refining business and facilitate exponential growth in the nation’s refining capacity.
Mr Kyari called for a deeper and more focused collaboration among downstream petroleum sector players across Africa, to provide solutions to the challenges posed by the supply of substandard fuels to consumers.
He said although the idea of petroleum products price stabilisation, which led to the introduction of fuel subsidy in the 1970s, was noble, it has since become a huge financial burden on the nation over the years.
The decision by the government to remove subsidy and deregulate the downstream sector of the petroleum industry in March 2020, he said, was to help free up fund for infrastructural development in the industry.
Also, he said deregulation policy, which would allow the market forces of demand and supply of petroleum products to dictate prices, would help eliminate market distortion, foster competition between operators, get more private sector players to build refineries in the country and promote efficiency across the entire fuel value chain.
Partnership to boost Africa’s refining capacity
He said increasing Africa’s refining capacity as well as improving the quality of fuel required refineries to implement sustainable, coordinated pan-African solutions that would meet the target fuel specifications.
Such an arrangement, he noted, would help in protecting the health and well-being of African nations and their citizenry against the hazards of substandard petroleum products.
“It is important to note at this point that the future of our continent does not just lie in our ability to unlock value from our vast natural resources, or powering an industrial and economic revolution, but also in our ability to implement proven refining solutions that consider the broader public health implications of our business decisions,” the NNPC GMD said.
On its part, Mr Kyari said to make high quality petroleum products available in Nigeria, the NNPC was making concerted efforts for a holistic rehabilitation of its four refineries in Port Harcourt, Warri and Kaduna.
Besides, he said, the Nigerian state-owned oil company was also collaborating with relevant private sector operators and investors to establish modular and condensate refineries in strategic locations in the country.
“These projects will be in line with the AFRI standards of AFRI-4 specifications of 50 particles per million for diesel; 150 particles per million for gasoline (petrol) by 2020, and AFRI-5 specification of 50 particles per million of sulphur in gasoline and diesel by 2030 respectively.
“Considering that the revamp of petroleum products storage depots and associated pipeline infrastructures is key to optimal operations of the refineries, the NNPC has decided to use a Build, Operate and Transfer (BOT) strategy to restore these facilities using private sector financing,” Mr Kyari said.
This process, he said, has progressed significantly as the process of partner selection was ongoing, to ensure sustainability of the refineries after their rehabilitation.
Nigeria, he added, was intensifying the promotion and utilisation of natural gas as a cleaner fuel in industrial and household operations, to ensure lower emissions to the environment.
Natural gas, he said, has been identified as the fuel of choice for the future as it has the full credentials to support the achievement of the Sustainable Development Goals (SDGs).
On the outlook for the downstream sector of the petroleum industry in Nigeria and across the African continent, the NNPC helmsman said the future is looking bright with attractive market conditions, large market, significant crude distillation capacity additions from various refinery projects, improvement of the distribution network and the use of natural gas.
He called on the refining professionals across the continent to use the abundant opportunities for strategic collaboration across the entire downstream industry value chain to deliver sustainable value for the continent.
On his part, the Executive Secretary of ARA, Anibor Kragha, who is also the Group General Manager, Chief Operating, Refineries at the NNPC, applauded the corporation for its efforts to bolster the continents’ refining capacity.
He assured participants at the online meeting that the association, along with other stakeholders, would continue to support the NNPC to achieve its set objectives in refining and supplying fuel consumers products that meet globally accepted quality and specifications.