Group Chief Executive Officer (GCEO) of Nigerian National Petroleum Company Limited (NNPCL), Mele Kyari, has disclosed that the federal government is indebted to the company to the tune of N2.8 trillion in fuel subsidy payment.
Kyari, who disclosed this to newsmen on Tuesday after meeting with President Bola Tinubu at the State House, Abuja, explained that the Petroleum Industry Act, said six months after the enactment of the Petroleum Industry Act, Petroleum Motor Spirit (PMS) was expected to be priced at its commercial value.
According to him: “So there will be no subsidies six months after the enactment on the PIA. That means by February 17th, 2022, there should have been no subsidy on PMS.
“Now the National Assembly and Government, in its wisdom provided for soft city in 2022, despite the fact that the provision of the PIA said terminated by 17th of February.
“So government can decide to spend its money anywhere it wants and it can bring succor and relief to its citizen. This is very typical. It happens all over the world. But however, that provision in 2022 and also 2023 has not been funded by government.
“A greater part of it is supported by the cash flow from NNPC’s other businesses and therefore, even though there is provision to the end of June, there is no financing even from the start. Therefore, since you can’t pay, you cannot expect NNPC to continue to carry it.
“This has been the position that the NNPC has taken and what the President simply say is obeying the law and also the realities that the federation can no longer pay NNPC for the burden of subsidy that we are carrying”.
He also stressed that the revelation by the President in his inauguration speech about the end to the subsidy regime was most welcomed as subsidy is no longer sustainable.
The NNPCL boss, who spoke in the company of the Authority Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Farouk Ahmed, further complianed that the heavy subsidy burden has made it impossible for the company to have enough resources to channel into its core businesses.
Kyari noted that the petrol queues that started resurfacing across the country since Monday are understandable as marketers will like to understand the meaning of the president’s pronouncement that “subsidy is gone.”
According to him, uncertainty on the remark also caused consumers to rush for the product, a situation which has resulted in the queues seen at fuel stations, assuring that government will initiate measures to cushion the effects of the removal of subsidy.
His words: “Since the provision of the N6 trillion in 2022, and N3.7 trillion in 2023, we have not received any payment whatsoever from the Federation.
“That means they (Federal Government) are unable to pay and we’ve continued to support this subsidy from the cash flow of the NNPC. That is, when we net off our fiscal obligations of taxes and royalty, there’s still a balance that we’re funding from our cash flow and that has become very difficult and affecting our other operations.
“We’re not able to keep some of these cash to invest on our core businesses and the end result is that it can be a huge challenge for the company and we have highlighted this severally to government that they must compensate and NNPC, they must pay back the NNPC for the money that we have spent on the subsidy.
“So today the country doesn’t have the money to pay for subsidy. There’s incremental value that will come from it. But it is not an issue of whether you can do it or not because today we can’t afford it and they are not able to pay our bill. That comes to how much is the federation owing NNPC now. Today, we are waiting for them to settle up to N2.8 trillion of NNPC’s cashflow from the subsidy regime and we can’t continue to build this.
“Fortunately also by virtue of the provisions of the law and also the, and the Appropriation Act 2023, it is no longer available for that funding and we are very convinced today that the country can no longer fund this subsidy bill and they will not be able to pay NNPC and therefore we are happy and pleased to hear Mr. President’s commitment to the elimination of this subsidy because they can’t afford it anymore.
“We will take necessary steps to ensure that we recover our costs from the market and also being mindful of the fact that, you know, a situation like this can lead to exploitation of customers.
“We’re also working with the regulator, who is here with me to see how we can cut any such excessive management of greed for, to say the least and this will be contained by the virtue of provisions of the law, the Authority or the Nigerian Petroleum Midstream and Downstream Regulatory Authority. And then the competition agency, they’ll play their part.
“We think this is a very commendable step taken by Mr. President to bring it to effect, the provisions of the law”, he said.
On why fuel queues are returning after the President’s proclamation, he said “all of us must have seen importance of what exactly this means and typically, consumers will rush the fuel station to fill their tanks and that is why you’re seeing these queues.
“Also, for marketers, they would like to see what exactly this means in the sense that, you know, so how are we going to sell the product if subsidy on PMS is removed and the combination of the two is what you are seeing, the obvious dislocation of distribution. And we believe that this will go away very, very quickly as you’re aware also.
“So maybe be aware, the Petroleum Industry Act has made it very clear that price of petroleum must be priced at market. That means there must be commercial price for petroleum six months and that time, six months after bringing into law of the petroleum industry at that are central, the Petroleum Industry Bill now the law that is August, 2021.
“So after that you do not have a request to any subsidy on Petroleum Motor Spirit. But however, our country also decided to provide for subsidy in the 2022 Appropriation Act and also half year in 2023.
“The combination of this is that while the Petroleum Industry Act was clear that petroleum should be priced, but it didn’t say that government cannot spend its money in any way it wants, therefore we as a commercial company established under the Petroleum Act, we are doing this simply as business delivering value to a supplier of last resort by batch of the law, but at the cost to the federation. And that cost includes the cost of subsidy”, he said.
Also speaking, the CEO of the NMDPRA, Ahmed, the FG will not place any price cap on the sale of petroleum products in the country, assuring also that government will defend the interest of Nigerians by ensuring that no marketer takes advantage of them and license interested importers.
“With the removal of subsidy as pronounced by Mr President, this has opened the flood gate for any market or company that wants to import PMS. And we are ready to issue licenses for them. At least that will open the competition that will reduce the burden.
“And let me assure Nigerians that the NMDRA and the Federal Competition and Consumer Protection Commission will make sure that consumers are not taken advantage of. We intend to work together on this,” he said.
Ahmed who said the Federal Government will not cap the oil price called on marketers to open their petrol stations and depots and sell to the public as they will soon get the government’s directive from the NNPCL.
“I cannot tell you the exact price because the market is deregulated. Therefore, it is going to be based on delivery. The NNPCL will tell all the companies their transfer price which will translate into what the pump price will be,” the CEO explained.
He further said in order to lighten the burden on NNPCL, being the sole importer of PSM in the country, it is ready to issue importation licenses to interested persons.
Ahmed said the criteria for importing fuel, will be the same as those importing import Kerosene and diesel.
“There are a lot of conditions to be met before you are given licence to import patrol. I cannot give you all of them now. But there are the same conditions to import Kerosene and diesel, the same condition you will meet to import premium motor spirit”, he said.