Dr. Emmanuel Ibe Kachikwu, Minister of State for Petroleum |
The level of
petrol subsidy declined as international petroleum crude oil prices, which
began to drop in July 2014, bottomed in January 2016 with the benchmark Brent
crude averaging US$30.80 per barrel. At that stage, the cost recovery pump
price of petrol (including normal profit) was nearly equal to the then petrol
pump price of N87/litre.
However, in
January, government introduced the revised petrol pricing template under which
the petrol pump price was N86.50/litre. The set price was ostensibly
subsidy-free and it was intended to be subject to review every quarter.
Additionally, 78 per cent of the first quarter 2016 petrol import allocation
went to the Nigerian National Petroleum Corporation (NNPC) while other oil
marketing companies got 22 per cent. The allocation was purportedly dictated by
“consideration of retail outlets ownership, marketers’ performance of previous
quarterly allocation as well as the challenges of sourcing foreign exchange.”
On the eve
of the first quarter, crude oil swaps were cancelled and replaced with Direct
Sales of 445,000 barrels daily domestic crude allocation and Direct Purchase
(import) of petrol. In the midst of the unremitting petrol scarcity, the
Minister of State for Petroleum Resources said, “the
main critical reason why you have this supply gap today is that although NNPC
has its own 445,000 barrels allocation of crude (which is being exceeded) the
individuals who should provide the balance of 40 per cent are not bringing in
any product… (NNPC) didn’t have the capacity, we didn’t have the funding, we
didn’t have access to the product and we didn’t have the foreign exchange.”
The Nigerian
people deserve cogent explanations. Did Petroleum Products Pricing Regulatory
Agency (PPPRA) not know that NNPC lacks the capacity to executive 78 per cent
of the petrol import allocation in a full quarter? But being aware of its own
incapacity, why did NNPC accept the volume of imports allocated to it? In any
case, when armed with the proceeds from export of 445,000 barrels of crude
daily, did NNPC lack the means to deliver? In the last quarter, the average
capacity utilisation of NNPC’s four petroleum refineries was negligible.
Direct sale
(export) of the daily domestic crude allocation at the lowest average January
Brent crude price noted earlier would fetch US$1.25 billion. Petrol is but a
fraction of refined products derivable from the exported crude oil volume which
(a NASS committee has established) is virtually sufficient for domestic
requirements. Why was a part of the forex earned not used to import the needed
petrol? With NNPC petrol supply performance put at less than 40 per cent, what
happened to the unutilised balance of the forex earned during the first
quarter? Relatedly, it is unclear if the sum of $236.7 million used in February
by the Federal Government to settle joint venture cash calls (JVCCs) was part
of the proceeds from export of domestic crude allocation. In any case, JVCCs
are not chargeable to domestic crude takings.
Pertinently,
the Minister of State propositioned the international oil companies (IOCs) soon
after they collected the JVCCs to sell forex to the “other oil marketers” for
the procurement of petrol. That arrangement simply turns the IOCs to
government-recognised large scale bureau de change. The plan is proof of an
obvious fact: the IOCs need naira funds for some of their operations. So, why
do the IOCs not routinely collect any needed naira sums directly from the
Federal Government as part of JVCC settlements? The conversion of IOCs in
Nigeria to grand money changers is unacceptable. Let both the oil marketers
angling to import petrol and dollar-laden IOCs in search of naira amounts head
to their respective banks, which are authorised to deal with any specific
requests on this matter on their behalf in the foreign exchange market.
As a matter
of fact, petroleum products are not on the list of items excluded from
accessing forex through the CBN. Hence the denial to oil marketers of forex for
import of petrol allocations throughout the first quarter was a benighted act
that has greatly set back the economy and compounded the suffering of the
generality of the people. There is need to stress that it is not the place of
President Buhari to direct the CBN to allow approved petrol importers to access
forex as happened recently. Nor is it the business of the CBN to arbitrarily
allocate forex to any sectors of the economy. The near economic standstill
caused by the lingering petrol scarcity is attributable to the past
president-dictated improper handling by the CBN of public sector supplies of
forex to the economy. It has been conclusively shown that in properly managed
deposit money bank-operated forex market, current inflows of public and private
sector forex are more than adequate for the country’s forex needs.
In the midst
of the unjustifiably induced socio-economic pain, it was disclosed that the
upstream joint venture operators would soon manage the NNPC refineries. Did
Nigerians deserve to be subjected to a paralysing petrol scarcity as a way of
softening them for the expansion of the IOCs to midstream petroleum operations
by diluting NNPC’s stake? The issue is not IOCs’ presence in midstream
operations because the people supported the NNPC’s call in the early 2000s for
IOCs to refine part of their crude oil output locally. That is still agreeable.
The problem is the seeming programmed reduction of NNPC’s stake in oil
operations.
Indeed, the
announcement is sequel to NNPC’s insistence on contracting external loans for
the settlement of JVCCs whereas the country possesses, and can generate any
time, more than enough forex to pay its way. There is an emerging pattern over
time in the actions of the CBN and NNPC. The former mismanages the national
currency and forex while the latter seems to have lately been given the
wherewithal but chose to unleash petrol scarcity with a view to foisting the
scheme being unfolded. All of this gives the impression that the economy is
being mismanaged on purpose despite the widely proffered solutions to Nigeria’s
fiscal and monetary, petroleum and economic problems, in order for vested
interests to return foreigners to full control of the commanding heights of the
economy. It is unacceptable. As the IOC joint venture operators prepare to
spread their wings over the NNPC refineries, there is need to caution that they
abide by the letter and intendment of the Nigerian Content Act. (Guardian)
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