Newly appointed Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) Dr. Emmanuel Ibe Kachikwu has hinted that the Federal Government spent over N5 trillion on fuel subsidy between 2006 and 20012.
This is even as the ongoing reforms at the Nigerian National Petroleum Corporation (NNPC) took another dimension last week, with the announcement of a new business model for the midstream oil sector that will end fuel importation.
Speaking on moves to transform the midstream oil sector into a transparent, efficient and fair market at the 2015 National Association of Energy Correspondents (NAEC) Conference with the theme, “Energy Crises and Sustainable Development in Nigeria: The Way Forward.” the GMD said it would involve the rehabilitation of the Brownfield Refineries. He said it was unfortunate that Nigeria has become the highest importer of Premium Motor Spirit (PMS) despite its huge resources. Kachikwu, who was represented by the Executive Director, Services, Nigerian Engineering and Technical Company (NETCO), a subsidiary of NNPC, however, assured that going forward, NNPC will ensure that this was no longer the case in the country.
Kachikwu assured that the corporation was fully committed to reforming the existing refineries to boost domestic petroleum product supply.
He said all the refineries have been re-streamed but are yet to attain optimal capacity, stating that removal of price control mechanisms is deemed imperative to ensure full growth of the sub-sector by allowing private stakeholders to complement government efforts in developing the industry. He said while Africa produces about 10 per cent of the world’s oil, only 3.6 per cent of that is refined on the continent, as its refining capacity has remained unchanged for the past 20 years. According to him, Cameroon and Cote d’Ivoire together export about 34mbpd, meeting only 10.2 per cent of the West and Central Africa demand shortfall.
Regrettably, NNPC helmsman lamented that over N5 trillion has been expended on fuel subsidy between 2006 and 2012, a development which makes the fuel subsidy regime unsustainable.
He explained that subsidy creates distortions in government revenue distribution as a result of round tripping and unnecessary carry over of expenditures every year in a way that is difficult for government to control or sustain. The NNPC boss disclosed that subsidy accounted for 20 per cent of the Federal Government’s budget in 2013, stressing that the government is not in control of the factors that influence retail fuel price, particularly fluctuations of crude oil price at the international market.
According to him, speedy implementation of the deregulation policy would go a long way in encouraging inflow of private sector and international investment; ensure that Nigerians derive fair deal from the abundant petroleum resources in the country through fair products’ prices for consumers and full cost recovery and reasonable margins for operators.
“Implementation of the policy will entrench efficiency in product usage, product availability and effective competition among investors hence putting an end to product shortage. However, critical enablers such as security of the supply and distribution infrastructure must be assured to guarantee the availability of the petroleum products at affordable prices,” he said.