Group Chief Executive Officer of Nigerian National Petroleum Company (NNPC) Limited, Mallam Mele Kyari, says the company has terminated its crude-for-petrol swap deal, otherwise called Direct Sale Direct Purchase (DSDP) contracts, with foreign refiners and consortia of traders.
Kyari spoke at the weekend during an interview with Reuters. He said NNPC would now pay cash for petrol imports. He also revealed that private oil marketing companies in Nigeria could begin importing petrol as early as this month.
However, as the fuel subsidy removal continued to generate angry debate nationwide, Independent Petroleum Marketers Association of Nigeria (lPMAN) called on President Bola Tinubu to walk his talk on the total deregulation of the downstream petroleum sector.
Kyari said, according to Reuters, "In the last four months we practically terminated all DSDP contracts. And we now have an arm's-length process where we can pay cash for the imports.
"This is the first time NNPC has said it is terminating crude swap contracts. By importing less petrol, as private companies import the bulk, NNPC will be able to pay for its purchases in cash."
The move was part of Tinubu's plans to deregulate the petrol market and reduce the burden of subsidy payment on government finances.
NNPC had been importing petrol from consortiums of foreign and local trading firms and repaying them with crude oil through the DSDP contracts since 2016, as it did not have enough money to import on a cash-and-carry basis.
Nigeria is Africa's biggest crude producer, but it imports most of its refined products after running down its refineries.
A significant drop in oil production last year, coupled with high global fuel prices due to the war in Ukraine, pushed NNPC's debt to traders higher. It owed the consortiums about $2 billion, Reuters quoted a September 2022 NNPC report to the Federation Account Allocation Committee as revealing.
Reuters quoted an in industry source with direct knowledge of the matter as saying that NNPC was still allocating crude for fuel swaps for July loading, though less than in previous months.
In its report detailing March crude oil loadings, NNPC allocated crude to the swap contracts held by the consortiums, the report said.
Kyari said NNPC's monopoly on petrol supplies was ending and private firms could start importing as early as this month. He added that Nigeria's total crude and condensate output was at 1.56 million barrels a day (bpd) as of Friday.
Nigeria has struggled to meet its Organisation of Petroleum Exporting Countries (OPEC) oil quota of 1.742 million bpd due to grand oil theft and illegal refining. That has raised doubts on whether Nigeria could meet supplies for the 650,000 bpd newly-inaugurated Dangote Refinery. NNPC has a contract to supply 300,000 bpd to the refinery.
NNPC had last week 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.
But the development did not go down well the Nigeria Labour Congress (NLC), which described the new pricing template as vexatious. Nigeria Labour Congress (NLC) had expressed displeasure over the, describing it.
NLC has announced plan to commence a nationwide strike from Wednesday.
IPMAN: For Subsidy Removal to Make Sense, FG Must Break NNPC's Monopoly on Importation
IPMAN called on Tinubu to walk his talk on the total deregulation of the downstream of the petroleum sector.
In a statement signed by IPMAN's President and National Secretary, Debo Ahmed and Chief John Kekeocha, respectively, the association stated that having taken a decisive position on the removal of subsidy on fuel, Tinubu must proceed to ensure that the sole right of the national oil company to import petrol was broken.
That came on the heels of divergent opinions on the new price increase by the sole importer of the product, NNPC. NNPC's four refineries with 445,000 barrels per day combined refining capacity had not been functioning at optimal capacity, while the Dangote refinery recently commissioned with 650, 000 barrels per day refining capacity was yet to commence operation.
But IPMAN urged Tinubu to ensure that other downstream sector players, aside NNPC, were allowed to partake in the importation of petrol into Nigeria.
IPMAN stated, "The primary essence of removing subsidy is to free the market and make it competitive." it explained that allowing other interested parties into the petroleum supply network, either through local refining or importation, will guarantee adequate production and supply and ultimately crash prices.
"This will precipitate reasonable reductions in the high price that is being witnessed at this initial take off," IPMAN stated.
The statement also enjoined the federal government to ensure that Nigerians at the receiving end of the subsidy removal felt the dividends in the areas of infrastructure development, health sector, as well as well as education and basic social amenities.
The statement said, "As the NNPC continues to justify its price template for Premium Motor Spirit (PMS), IPMAN wishes to lend its voice in support of the current removal of the long awaited petroleum subsidy, which had lingered for more than 20 years.
"It goes a long way to demonstrate the very strong will and dexterity that President Bola Ahmed Tinubu has in his promise to liberate Nigerians from perpetual indebtedness and easy borrowing, which has jeopardised all efforts for reasonable progress in the country.
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"It is our belief and hope that the NNPC will ensure that the product is made available for Nigerians and that the NMDPRA ensures adequate monitoring and distribution, making sure that the policy takes place seamlessly.
"However, it's important to state here that the primary essence of removing subsidy is to free the market and make it competitive. This is by allowing other interested parties into the petroleum supply network.
"This is either by engaging in importation or local refining. It's the duty of government to ensure that all bottlenecks and frustrations in this regard are removed so that adequate productions and supplies will eventually precipitate reasonable reductions in the high price that is being witnessed at this initial take off."
IPMAN stated that while many Nigerians welcomed the policy "with a pinch of salt", it believed that the constraining sacrifices of the people in "swallowing this bitter pill" will be compensated with obvious and empirical proofs of how the dividends of the subsidy removal positively impacted their lives.
The group promised to align with the present administration in the "social contract" by playing according to the rules and believing that the policy will be a milestone in repositioning Nigeria's ailing economy.
