The Federal Government will divert N457bn provided for petrol subsidy in the budget to other sectors of the economy, the Group Managing Director of the Nigerian National Petroleum Corporation, Mele Kyari, has said.
He also disclosed that the corporation would not be involved in running refineries after they must have been rehabilitated.
Kyari, who spoke in a live television programme monitored in Abuja, noted that Nigeria was subsidising fuel consumption in other West African countries.
For this, he added, fuel subsidy must go for ever.
He said, “And above all, you have a huge economic distortion where people don’t pay for what they consume.
“That means that you have the cross-border issues, which is because you are selling fuel at a lower price than the market price and we are therefore practically supplying fuel to the whole of West Africa.
“And because of that distortion, some people don’t get salaries. The minimum wage is not implemented in some parts of the country and there are so many distortions.”
On the amount already budgeted as under-recovery in the 2020 budget, Kyari said it would vanish.
He said, “No deduction for under-recovery because there will be none. Obviously, those costs will vanish from the Appropriation Act and while that is done, it becomes available for other sectors of the economy.
“There are so many things that the cost of under-recovery has prevented us from doing. We are supplying the whole of West Africa and so the under-recovery is bloated so much because you are actually subsidising West Africa.”
The NNPC boss explained that the downstream oil sector would still need a regulator despite the halt in subsidy.
This, he said, would ensure that people were not exploited by the market, as it would provide a band of prices within which marketers would sell.
“What we are putting in place today is a situation where market forces will take control of the market instead of subsidising products mainly for the elites across the country,” he stated.
He also insisted that there would be no conversation about coming back to the fuel subsidy regime anymore, stressing that the PPPRA would modulate prices and provide a band going forward.
Kyari noted that the current band was N123.5/litre to N125/litre, which was why some filling stations still sell petrol at N125/litre despite the new price announced by the PPPRA on April 1, 2020.
He, however, stated that once market forces set in fully, marketers would adjust and consumers would have choices.
“Ultimately, the band keeps moving. It can go down or up but it will create space for competition and you could see people selling below the band, especially those who have excellent procurement processes,” the GMD stated.
He explained that the band would always be narrow, as it could be between plus or minus N3.
On complaints by marketers that stakeholders were not carried along before the decision on subsidy removal was taken, the NNPC boss stated that the situation did not warrant the involvement of other players since NNPC was the sole importer of petrol into Nigeria.
In another interview, the NNPC said that the corporation would no longer be involved in the management of the nation’s refineries after their rehabilitation.
He stated that upon completion of the ongoing rehabilitation exercise, the services of a company would be procured to manage the plants on an operations and maintenance basis.
“We are going to get an O&M contract, the NNPC won’t run it. We are going to get a firm that will guarantee that this plant would run for some time. We want to try a different model of getting this refinery to run. And we are going to apply this process for the running of the other two refineries,” he stated.
He explained that the plan, ultimately, was to get private partners to invest in the refineries and get them to run on the NLNG model where the shareholders would be free to decide the fate of the refineries going forward.