As public outcry over the sudden hike in the pump price of petrol continues, Group Chief Executive Officer (GCEO) of Nigerian National Petroleum Company (NNPC) Limited, Mr. Mele Kyari, says President Bola Tinubu has directed that palliatives be put in place to cushion the effect of the increase on Nigerians. Kyari disclosed this yesterday while fielding questions from journalists at the end of a closed-door meeting with members of the National Working Committee (NWC) of the governing All Progressives Congress (APC) at the party’s national secretariat in Abuja.
On same day, Kyari said during an interview on ARISE News Channel that the adjustment in petrol pump price was not fixed. He stressed that prices would continue to change in reaction to market forces in the coming weeks.
NNPC had on Wednesday adjusted the pump price of petrol by nearly 200 per cent, from N195 per litre to between N488 and N557 nationwide. The development followed the announcement by Tinubu during his inaugural address on Monday that fuel subsidy was “gone”. Tinubu promised to re-channel the expected savings to education, health and other sectors.
NLC had expressed displeasure over the new pricing template, describing it as vexatious.
Furthermore, Kyari, while speaking with the APC NWC members, noted that NNPC could not continue to be the sole importer of petrol in the country.
The GCEO said, “There is a gradual process now of making a flexible and single exchange rate regime. Everyone will be able to have access to foreign exchange and there is a transition going on now and the NNPC cannot continue to be the sole importer. We know that this is going to vanish and the market will stabilise this.”
On the rehabilitation of the four national refineries, Kyari said, “There is an on-going process of rehabilitation and one of the refineries will come on stream this year. The second will come on stream next year and the third will come in 2025.”
The NNPC boss said it was very obvious that the country could no longer afford the subsidy payment and it had to be removed.
According to him, “Subsidy bills have piled up. The country is not able to settle NNPC for the money we are spending on the subsidy. Therefore, pricing this petroleum at the market is the right thing to do at this time. We believe that this will benefit the overall country in the long run.
“I am aware that Mr. President has directed some engagement and some palliative will be put in place and I am very sure this will happen.”
Kyari pointed out that there was provision for subsidy in 2022. However, he said in 2023, not a single naira was provided for the purpose of financing the subsidy.
Kyari stated, “And ultimately while we held back our fiscal obligations, we still have a net balance of over N2.8 trillion that the federation should have given back to the NNPC.
“For any company, when you have negative N2.8 trillion, there is no company in the whole of Africa that will lend to you. You cannot have receivables. The provision of subsidy is there but absolutely there is no funding for it. It means it is only on paper. So, it doesn’t exist.
“So, we no longer can bear it because of liquidity. If we continue we will run into defaults and the defaults of NNPC is the default of Nigeria. Once NNPC goes into defaults and liquidity, it affects every borrowing done by the country, even the sub-nationals. Your lenders will come back to you and say your country can no longer pay.”
Kyari disclosed that when Tinubu announced that subsidy was gone, within 24 hours, investors in both the money and capital markets reacted positively.
He stated, “It is nothing else other than the statement around subsidy and balancing of the forex market. These two elements are major concerns that every investor all over the world, every partner that we have, is worried about. What is your forex regime and how do you deal with your subsidy?
“They know that this subsidy constitutes a huge amount of money and this country may not be able to survive and pay its debts. It is very clear that everybody understands this.
“Before today, the average subsidy level was N400 billion every month. That means every month you can do one major capital project from money that you do not have. This is really is what it means. There is nothing anybody can do about it. There is this common argument that the masses will suffer. That we are going to have problems with them. I agree that once you increase prices of this proportion, as it has happened, it will have impact on inflation. There is no doubt about it. It is very typical also, it goes up and down. The market determines what happens next.”
Kyari stressed that the target of the president was to have seven per cent Gross Domestic Product (GDP) growth, saying you cannot have this if there is distortion in demand and consumption patterns.
In a related development, speaking on “The Morning Show” on ARISE News Channel, Kyari stated that the adjustment in the prices of petrol was not fixed, saying pump prices would continue to change in reaction to market forces. Kyari also noted that the removal of subsidies would improve efficiency in the downstream sector.
Kyari stated, “The price we are seeing today at our filling stations is the current market price of the commodity. So, what this means is that prices in the market can go down at any time and, of course, the market will adjust itself.
“The beauty of this is that there’ll be new entrants because marketing companies’ reluctance to come into the market all along is the very fact that there’s a subsidy regime that is in place.
“Subsidy regime doesn’t have the guarantee of repayment back to those who provide the product at a subsidised price. Now that the market is deregulated, oil marketing companies can actually import product, whether it is produced locally, they can buy and take them into the market and sell it at commercial price.
“Therefore, you will see competition, even with NNPC, and by the way, by law, NNPC cannot do more than 30 per cent of the market going forward. As soon as the market stabilises, oil-marketing companies are able to come in. That means that even the requirements of energy security in the law indicate that you have to be up be able to have at least 30 per cent of the stocks in the country.”
On the issue of inefficiency and extra burden on the federal government along the downstream sector, Kyari said those inefficiencies would be eliminated.