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Economy

Kachikwu, Others Worry as Fuel Marketers Halt Importation

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Emmanuel Ibe Kachikwu
  • Kachikwu, Others Worry as Fuel Marketers Halt Importation

One year after the partial liberalisation of the nation’s fuel market, the Minister of State for Petroleum Resources, oil marketers and other stakeholders are concerned over the continued supply of over 90 per cent of petroleum products in the country by the Nigerian National Petroleum Corporation.

Most oil marketers have stopped fuel importation due to shortage of foreign exchange and increase in crude prices, which they claim have made it unprofitable to import petrol and sell at N145 per litre.

The Federal Government had on May 11, 2016 increased the price of Premium Motor Spirit (petrol) to N145 per litre from N86, putting an end to fuel subsidy to marketers.

Kachikwu, in his presentation at the 2017 first Business Clinic of the Petroleum Downstream Group of the Lagos Chamber of Commerce and Industry in Lagos on Friday, stressed the need to reposition the downstream sector of the oil and gas industry.

He noted that the downstream sector witnessed increasing gaps in product supply in the first and second quarters of 2016, adding that the non-availability of forex and the inability of marketers to open letters of credit had force them to stop importation.

The minister, who was represented by the Chief Operating Officer, NNPC, Mr. Henry Ikem-Obih, said the NNPC was forced to take up the obligation of providing more than 90 per cent of the domestic requirement to cover the demand for petroleum products.

“The NNPC was not designed to provide this kind of service. Historically, the NNPC had done an average of 48 per cent of Nigeria’s fuel requirement. What eventually happened was that the NNPC was stretched, and to complicate the situation, there was no provision for fuel subsidy in the 2016 Appropriation,” he said.

He said the environment had changed since the downstream sector was partially deregulated last year, adding that the rise in crude oil prices had pushed up the price of refined products.

Kachikwu said, “Again, we are back to the situation that we were last year. Today, the NNPC has gone back to importing about 95 per cent of products to ensure stability. In fact, through the months of December, January, February and most of March, we did a 100 per cent for the market. We have seen two windows for private importation in the last four weeks.

“The NNPC is absorbing some of the cost implications resulting from the increase in crude oil prices and the current price ceiling of N145 at the pump for the PMS.”

He stressed the need to revisit the price modulation that was introduced to reflect the movement of crude oil prices on fuel price.

The minister said, “If we had continued the modulation policy as structured, we probably would, at this stage, have created sufficient stability in the market where marketers can go out, get forex from the Central Bank of Nigeria, import products and recover their investments, or, in the worst case, break even.

“A lot of time, we control pricing because it is convenient and for several reasons. But it ultimately creates insecurity and distortions in the market.”

The Managing Director, Heyden Petroleum Limited and Chairman, Depot and Petroleum Products Marketers Association, Mr. Dapo Abiodun, said when the price band of N135 to N145 was introduced last year, crude oil price was around $35 per barrel and the exchange rate pegged at N285 to a dollar.

He said, “The plan last year was that as crude prices changed, hopefully, we would be able to keep exchange rate constant, we would continue to modulate the selling price maybe every quarter. The price of crude has moved up; the exchange rate has increased to N305/$; however, the petrol price band remains unchanged.”

He said marketers continued to import and their margins began to shrink, adding that they stopped importation when it became unprofitable.

Abiodun said, “Today, marketers own banks over $2bn. There is hardly any bank in Nigeria today that is advancing credit to any marketers. Today, the NNPC is warehousing subsidies plus the inefficiencies associated with the operations.”

The President, LCCI, Dr. Nike Akande, said the theme of the event, ‘Nigerian Economy in a Recession: Alternative strategies for the Petroleum Downstream Sector’, was apt and timely.

She said, “In the face of the evolving restructuring of the oil and gas sector in Nigeria and the call for new models of refineries, we call on the government to ensure an appropriate regulatory environment for the private sector to drive investments and operations of the sector for optimal profitability. We reiterate our call for the passage of the Petroleum Industry Bill to boost confidence and give direction in the sector for investors.”

Commenting on the NNPC’s dominance of fuel importation, the Chairman, Petroleum Downstream Group, LCCI, Mr. Ken Abazie, said, “We believe that is abnormal and it is not sustainable. It is no longer profitable to bring in petrol and sell at N145 per litre.”

He said the lack of adequate refining capacity in the country was a big challenge that needed to be urgently addressed.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

NNPC to Focus on Domestic Gas Growth, Says Kyari

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Gas Exports Drop as Shell Declares Force Majeure

FG, NNPC to Focus on Growing Domestic Gas Utilisation

Mr. Mele Kyari, the Group Managing Director, Nigerian National Petroleum Corporation (NNPC), has said the corporation is presenting focusing on growing domestic gas utilisation.

The Managing Director disclosed this on Tuesday during a virtual BusinessDay Energy Series Summit with the theme, “Nigeria at 60: Harnessing Nigeria’s Energy for the Future.”

The NNPC boss also said the corporation is committed to delivering key gas infrastructures such as Escravos-Lagos Pipeline System II, Obiafu-Obrikom-Oben Gas Pipeline, Ajaokuta-Kaduna-Kano Gas Pipeline, and Central Gas Processing Facilities.

He stated that NNPC was working on developing five gigawatts of power generation by 2022.

He said, “At the NNPC we are aggressively pursuing other gas development initiatives with the aim of improving Nigeria’s economy using the appropriate fuels.

“In terms of gas and power, we are developing and integrating gas and power infrastructure networks (increase interconnectivity) as well as stimulating gas demand (power generation, feedstock and transport, etc).”

Kennie Obateru, the NNPC spokesperson, quoted the NNPC boss in a statement issued in Abuja. He said the corporation was working on domestic gas utilisation to five billion standard cubic feet of gas per day.

He added that the Nigerian Liquefied Natural Gas Train 7 would be completed and delivered by 2024.

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Economy

Senator Rejects Aisha Umar From North-East as PenCom DG Replacement for South-East

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pension funds

Law Markers Rejects President Buhari’s PenCOM Director-General Nominee

The Senate has rejected President Buhari nominated Director-General of the National Pension Commission, Aisha Umar.

Some of the Senators, who vehemently protested the nomination immediately the Senate President, Ahmad Lawan, read Buhari’s letter said Aisha Umar from the North-East should not be replacing the former DG, Mrs Chinelo Anohu-Amazu, who is from the South-East.

The aggrieved senators said the action of the president is flagrant breach of the Act that established the PenCom.

According to Section 20(1) and section 21(1) and (2) of the National Pension Commission Act 2014, states, “In the event of a vacancy, the President shall appoint replacement from the geopolitical zone of the immediate past member that vacated office to complete the remaining tenure.”

Meaning President Buhari had acted against the Act establishing the PenCom.

Speaking on behalf of the aggrieved Senators, Enyinnaya Abaribe, the Senate Minority Leader, said “I recall that the tenure of the incumbent was truncated. Therefore, the new letter from the president that has now moved the chairman of the commission to another zone may not be correct.

“It is against the law setting up the National Pension Commission and the Federal Character Commission.

“Before you (Lawan) send it to the appropriate committee tomorrow, (Wednesday), I wish to draw the attention of the committee to it.”

The Senate President, however, rejected the minority leader’s point of order and observation, saying “That is for me to interpret because I interpret the laws here. If there is any petition to that effect it should be sent to the committee.”

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Economy

Electricity Regulatory Commission Suspends Tariff Increase for 14 Days

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ossiomo

Nigerian Electricity Regulatory Commission Suspends Tariff Increase for 14 Days

The Nigerian Electricity Regulatory Commission (NERC) has suspended the increase in electricity tariff in accordance with the resolution reached between the Federal Government and the Nigerian Labour Congress and Civil Rights groups.

The commission suspended the new tariff implemented on September 1, 2020 for 14 days.

The NERC, in its Order No. NERC/209/2020 issued around 10.30 pm on Tuesday, describing the regulatory instrument as “NERC Order on suspension of the Multi Year Tariff Order 2020 for the electricity distribution licensees.”

The commission said, “This order shall take effect from 28th September 2020 and shall cease to have effect on the 11th October 2020.”

This is coming a day after the labour union agreed to halt a nationwide industrial action to allow the government fashioned out a way to address the recent increase in prices from pump price to electricity bill.

Labour had described Federal Government action as anti-people policy, especially given current economic realities.

The government on the other hand had said the hikes were touch necessary decision to advance the nation’s economy and further improve power supply and revenue generation necessary to deepen economic growth.

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