Subsidy on petrol hits N1.4tn per year, says FG

A total of N1.4tn is now being spent annually by the Nigerian National Petroleum Corporation as subsidy on Premium Motor Spirit, popularly known as petrol, the Federal Government has said.

Although it described the amount as under-recovery, the government stated that the national oil firm had been shouldering the huge financial burden, because the NNPC is the country’s supplier of last resort when it comes to the provision of petroleum products.

The Minister of State for Petroleum Resources, Ibe Kachikwu, who disclosed this while speaking at a Liquefied Petroleum Gas workshop organised by the Federal Ministry of Petroleum Resources in Abuja on Thursday, also stated that the ministry planned to unveil an infrastructure rebirth map for the oil and gas sector in two months.

On March 5, 2018, the NNPC announced that it was spending N774m daily (about N23.99bn monthly) as subsidy on the 50 million litres of PMS consumed across the country.

The oil firm stated that the huge under-recovery was due to the proliferation of filling stations in communities with international land and coastal borders across the country.

On Thursday, Kachikwu echoed the fact that the NNPC was spending enormous resources subsidising petrol, as he told guests at the programme that about N1.4tn had been declared as under-recovery by the national oil firm.

When asked if the N1.4tn, which he earlier mentioned in his address to participants at the workshop, was the current figure being spent by the NNPC, the minister replied, “Yes, it’s current.”

Probed further to state what the government was doing to handle the under-recovery, Kachikwu said, “Let me focus on gas. That (under-recovery) is being addressed at very high levels.”

The Group Managing Director, NNPC, Maikanti Baru, explained that the multiplication of filling stations had energised unprecedented cross-border smuggling of petrol to neighbouring countries, making it difficult to sanitise the fuel supply and distribution matrix in Nigeria.

Baru stated that a detailed study conducted by the NNPC indicated strong correlation between the presence of the frontier stations and the activities of fuel smuggling syndicates.

He said the activities of the smugglers led to the recent abnormal surge in the evacuation of petrol from less than 35 million litres per day to more than 60 million litres per day, which was in sharp contrast to the established national consumption pattern.

Providing a detailed presentation of the findings, the NNPC boss noted that 16 states, having among them 61 local government areas with border communities, accounted for 2,201 registered fuel stations.

He stated that the tanks of the stations had a combined capacity of 144,998,700 litres of petrol, adding that in the same vein, eight states with coastal border communities spread across 24 LGAs accounted for 866 registered fuel outlets, with combined petrol tank capacity of 73,443,086 litres.

Baru explained that because of the obvious differential in petrol prices between Nigeria and other neighbouring countries, it had become lucrative for smugglers to use the frontier stations as a veritable conduit for the smuggling of products across the borders.

This, he said, had resulted in a thriving market for Nigerian petrol in Niger Republic, Benin Republic, Cameroon, Chad and Togo, as well as Ghana, which has no direct borders with Nigeria.

“The NNPC is concerned that continued cross-border smuggling of petrol will deny Nigerians the benefit of the Federal Government’s benevolence of keeping a fixed retail price of N145 per litre despite the increase in PMS open market price above N171 per litre,” Baru stated.

Kachikwu had earlier told journalists that the petroleum resources ministry was planning to unveil an infrastructure rebirth map for the country’s oil and gas sector.

He said the map, which President Muhammadu Buhari is expected to unveil in the next two months, would open up the sector to investments in critical areas.

Kachikwu stated, “There is a lot more private sector investment in upstream than there is in downstream in terms of actual infrastructure, and that is why the government is more focused in upstream. We are also hoping to launch an infrastructure rebirth map for the oil sector over the next two months. And I hope the President will launch it.

“And the effect of that will be to open up tariff, create policy positions that will enable people to go in and invest in critical infrastructure that is needed. Because everywhere you look, whether it is distribution of petroleum products, it is done massively through trucks rather than through pipelines.

“Now, whether it is to take crude to refineries or whether it is being able to distribute gas all over the country, infrastructure is so key. There is a lot of stranded gas everywhere, lots of stranded power everywhere; distribution is key, infrastructure is key. We need to find a way or find enough incentives that will enable the private sector to go in very bullishly and put the money where it is supposed to be.”