16 February 2018

Nigeria: Fuel Scarcity - Kachikwu Explains Persistence, Insists No Increase in Pump Price

Photo: This Day
Fuel scarcity.

Abuja — In spite of the difference between the N170 landing cost of petrol and N145 pump price ceiling, the Minister of State for Petroleum, Dr. Ibe Kachikwu, insisted on Thursday that the federal government had no plans to jack up the price of the essential commodity.

The minister's position was reinforced by the Senior Special Assistant on Media and Publicity to the Vice-President, Mr Laolu Akande, who, at a post National Economic Council (NEC) meeting briefing for State House correspondents in Abuja, said emphatically that price increase was not on the card for now.

Kachikwu, however, explained that the scarcity of petrol and the attendant queues at petrol service stations across Nigeria had lingered for long because the federal government had been unable to address the logistics and policy issues that could end the shortage.

Speaking at a press briefing in Abuja to intimate journalists with the ministry's plan to host a new oil and gas conference and exhibition, the Nigerian International Petroleum Summit (NIPS), next week in Abuja, the minister said the country would have to address certain fundamental policy issues especially with regards to the price of petrol to make the scarcity go away.

He, however, reiterated that the government was not ready to effect any pump price increment, adding that President Muhammadu Buhari was sympathetic to the sufferings of Nigerians in this regard and thus committed to keeping the price at N145 per litre.

Also with regards to the country's hosting of the maiden edition of the NIPS at a time its downstream petroleum sector is greatly challenged with petrol scarcity and the kind of message this could send to the global audience that would be attending the conference, the minister said he would direct the Nigerian National Petroleum Corporation (NNPC) to ensure the queues in Abuja are cleared before the conference starts.

"I can tell you behind the scenes, a lot of meetings are taking place because the fuel queue issue is both logistics and policy issues. We will need to address fundamental policy issues to enable it go away especially in the area where the pricing is showing differentials between the landing and sales price, what do we need to do to continue to sell at N145," said Kachikwu.

He, however, added: "The president is obviously very committed in keeping the price of petrol at where it is because he realises and sympathises with the sufferings of Nigerians.

"We did a massive price hike two years ago under me, we don't intend to do that again. We need quite a lot of efficiency re-engineering, that is one of the things that both the NNPC and most of the parastatals who are involved in this are doing. So, give us a bit of time, a little bit of patience."

Responding to a question on how the country would host the NIPS in the midst of a lingering fuel supply crisis in the Federal Capital Territory (FCT), the minister said: "I take your point and my directive to NNPC would be to get these queues out of Abuja.

"The NNPC is working round the clock on this, if you remember when this first started in December, it was a lot more massive. Lagos is fuel queues free and a lot of the state capitals are. Abuja is still struggling because of the logistics issues. I haven't gone round today but when I went round yesterday there was a huge improvement and I will be instructing the NNPC to do whatever it takes to ensure there was no queues next week.

"Quite frankly, they will have to do whatever it takes to get this eliminated in Abuja, that is the directive I will be sending to the NNPC and let them work night and day to put a lot more efforts in trying to do this."

Also explaining the shortage at the end of the meeting of NEC at the State House, Abuja on Thursday, Bauchi State Governor, Alhaji Mohammed Abubakar, said the Group Managing Director of the NNPC, Maikanti Baru, briefed the council on the lingering fuel scarcity across the country.

According to him, the shortage was caused by what he described as an inter-play in exchange rate and the price of crude oil at the international market, explaining that the trend affects the landing cost of refined products in Nigeria.

Abubakar said given the development, the current N145 pump price of petrol is "almost impossible" and hence, NEC asked its committee to interface with the NNPC to examine the current cost of fuel.

"As at today, most of all independent marketers have stopped importing refined products into Nigeria. It is only the NNPC that has been doing it. And the NNPC has been suffering a lot of setbacks - the highest amount of under-recovery. By under recovery, it means the inter-play between the landing cost of a litre of the PMS in Nigeria and the pump price of that product.

"If the product lands at N170 for example and you sell at N145, immediately, you know that you have an under-recovery of about N25 for each litre of fuel. So, he submitted his report and the National Economic Council has a committee that has been interfacing with all revenue generating agencies of the federal government under the chairmanship of the governor of Gombe State.

"That committee has been charged with the responsibility of interfacing with NNPC with a view to determining the correct price for (premium motor spirit) PMS considering the price of the product in especially countries that are bordering Nigeria. Because that is one of the reasons that encourage smuggling of the products to these areas," Abubakar stated.

But responding to a question on whether he meant that the committee was expected to come up with a new pump price of fuel, the Senior Special Assistant to the President on Media and Publicity, Mr. Laolu Akande, was swift to clarify that the committee's assignment does not include a review of the current price of fuel, saying there was no plan whatsoever to review the price upward.

No Panic over Shale Oil Rebound

Responding to questions on the rebound of Shale oil and its likely impact on the market, Kachikwu explained that the recent rebound that halted the bullish price rise that the oil market witnessed on the back of production cuts agreements reached and implemented by member countries of the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC members led by the Russian Federation was not so much of a worry to OPEC.

According to him, the slight drop in oil prices were still insignificant as to push OPEC to become reactionary.

He said: "In terms of the price, I don't think we need to be panicky about it, we hit an all-time $70 per barrel in December, which was a surprise to all of us. We are not ruffled by it, I know it has come down to highest $60s now.

"Shale has got to be active and we know whenever we are in excess of $65, Shale gets very active because the fundamentals become much more supportive to Shale investments.

"But, I've always said that OPEC needs to just focus on itself and what it needs to do, and forget what is happening in Shale. Every OPEC producer must work hard to be a least cost producer because the truth is that if Shale can produce at $65, there is absolutely no reason why we should be struggling. So, upper $60s is not too bad, we moved from $27 and $28, let's not begin to complain, it is a bit too early. These things fluctuate."

He also explained that government decided to host the NIPS to help Nigeria's oil and gas industry build its capacities and competitiveness.

Kachikwu noted: "The NIPS is supposed to be the African OTC equivalent. Those of you who were at the Houston OTC last year when I attended will remember that I made a policy statement that effective this year, we are going to begin to wind down our massive attendance at the OTC and this is not against the values from the OTC but for over the years, tons and tons of Nigerians go to the OTC for jamboree and I decided that going forward we will not be going to the OTC enmass anymore, we will try and develop our industry because a lot is happening in our industry."

Report Says IOCs Still Cheat Nigeria in PSC Earnings

Meanwhile, a report, the 2017 Benchmarking Exercise, conducted by the Nigeria Natural Resource Charter (NNRC) has disclosed that the current earnings of the Nigerian government from crude oil Production Sharing Contracts (PSCs) it signed with International Oil Companies (IOCs) operating in her oil fields were amongst the lowest in the world.

The NNRC report also noted that at the moment, the fiscal regime that applies to Nigeria's production of crude oil was skewed more in favour of the IOCs than to the country, which owns the oil, adding that the administration of oil-related taxes in the country were still very complex, thus leaving a lot of loopholes that IOCs leverage to short-change her.

Presented on Thursday at a workshop organised by NNRC in Abuja, the report looked at a set of precepts that measure how well Nigeria has done in managing her natural resource, in this case oil and gas, for the benefit of its current and future generations of citizens in 2017, and disclosed that not very much had happened to guarantee that the industry was progressive.

The NNRC said it was in charge of implementing the Natural Resource Charter (NRC) in Nigeria, and that the charters in the NRC included 12 precepts bordering on legal framework and institutions in the oil industry, transparency and accountability, exploration, licensing and monitoring, taxation and other company payments, as well as the local impacts of oil and gas exploration and production amongst others.

On the precept that has to do with taxation and other company payments, the report stated: "The fiscal regimes remain unfavourable to Nigeria with the International Oil Companies benefiting more. The taxes in the sector remain complex with multiple agencies saddled with the responsibilities of collecting diverse types of taxes and streams of revenues and the ability of revenue authorities to collect what is due remains in doubt due to inadequate capacity and resources."

It further explained on this that: "Government's take from the PSCs for Nigeria remains among the lowest in the world and deep-water oil royalties remain at zero per cent."

The report stated that there are lots of outdated contracts and expired memorandum of understandings (MoUs) that are still in force in the industry, adding that they are all resulting to under assessments and underpayments.

On exploration and licensing, it said that the level of disclosure of information on exploration licences were still very poor, and that while the power of licences award was still within the purview of the minister of petroleum resources, this leaves room for abuse and unnecessary delays.

Speaking on the report, the NRC Programme Coordinator, Tengi George-Ikoli, explained that the NRC was designed as a global initiative to help governments and societies effectively harness the opportunities created for them by their natural resources, and that the benchmarking exercise report was in line with this.

George-Ikoli, said: "The NNRC uses the results from the assessment to proffer policy options and practical advice for government, civil society, and stakeholders in general on how to best to manage resource wealth for the overall benefits of the people.

"The first 10 precepts provide guidance on how best to manage natural resources while the last two precepts focus on the actors in the field, mainly the extractive companies and those responsible for international governance."

She stated as regards Nigeria: "We recognise that the government has embraced a number of reforms notably the approval of the national oil and gas tax policies by the Federal Executive Council and the recent passage of the PIGB by both houses of the National Assembly, however, there is yet more to be done to quell the incidences of fuel subsidy currently affecting the lives of Nigerians."

More on This

Nigerians Stuck in Queues Nationwide As Fuel Crisis Continues

There is no respite in sight for Nigerians as the fuel crisis, which began in November 2017, continued on Thursday. Read more »

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