Nigeria: Oil Price Slump - Govt Not Returning Fuel Subsidy, Under Recovery - NNPC

(file photo).
7 April 2020

There are indications that the federal government may deregulate the petroleum downstream sector as subsidy on Premium Motor Spirit, PMS known as petrol has been removed.

Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, yesterday, hinted of a possible deregulation of the Nigerian downstream petroleum sector, stating that the Federal Government has eliminated subsidy and under recovery in the industry.

Speaking in an interview monitored on a television programme in Abuja, Kyari said : "There is no subsidy and it is zero forever. Going forward there would be no resort to either subsidy or under recovery of any nature. NNPC will play in the marketplace; it will just be another marketer in the space. But we will be there for the country to sustain security of supply at market price."

Kyari further disclosed that Nigeria's crude oil and condensates output has risen to 2.3 million barrels per day.

He stated that the output growth, which was achieved on Sunday, was the first time the country was hitting that milestone in very many months and years.

He noted that despite the glut in crude oil supply across the world due to the Novel Coronavirus (COVID-19) pandemic, the country was still getting buyers for its crude oil, while he added that the number of stranded vessels carrying Nigeria's crude oil had dropped to less than 20.

He said, "There is no challenge with that. The buyers have choice now. Choice of quality and choice that is associated with distance. These two factors will determine which crude oil consumers buy. Our major source of trade is Europe, followed by Asia, particularly India.

"And in times like this when crude oil prices go down, what buyers do is to buy the cheap crude available and take them into storage. So the way to gauge this is when your buyers do not return the crude after six days of purchase. For by contract, after allocation of a cargo, the buyer is supposed to come back to you within six days and say I cannot take this. There is a legitimate right to do that.

"When we reported stranded cargo it means that our partners are unable to find a way around it as at the point in time we reported. But I am happy to announce that that number has gone down substantially, I don't have the exact numbers for today, but it is now less than 20."

Kyari further projected that crude oil prices would end the year at an average of $30 per barrel going by global economic trend.

Meanwhile, in another development, the federal government condemned the huge expenditure expended by NNPC on moribund refineries.

The Senior Special Assistant to the President on Niger Delta Affairs, Senator Ita Enang, disclosed this in a communiqué obtained yesterday after a meeting between him and the Association of Artisanal Local Refineries Operators in Nigeria, ALRON held in Abuja recently.

Enang bemoaned the current state of the country's refineries, especially the losses posted by the facilities and the huge amount the NNPC continue to expend on the refineries.

He said, "Whereas, if the mega refineries were not even in operation, Nigeria would have been saved the losses which come from other revenues of the federation. Whereas experts have asserted that so long as import and subsidy operates, our mega refineries may never work as it is more profitable for operators to import, gaining from subsidy paid."

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