There are clear indications that the Federal Government’s committee which was charged with the responsibility to over see the execution of crude oil sales to local refineries in naira would further examine the pricing of Premium Motor Spirit, popularly called petrol, to be released by the Dangote Petroleum Refinery next month.
The committee is also going to draft out a framework that would establish a ceiling on the amount the Dangote refinery would pay for crude in naira.
They also noted that the Federal Government would have to ascertain whether it would subsidise petrol purchased from the plant or to let Nigerians purchase it at market value.
However, oil marketers have stated that the price of Dangote petrol would be more than what it currently costs at the pump and emphasised that if the federal government does not step in to control the price, it would be hard for dealers to purchase the product directly from the plant.
The landing cost of the product, as revealed by reports recently published by the Major Energies Marketers Association of Nigeria, showed that the cost of PMS was N1,117/litre. Petrol sells for between N600 and N700/litre depending on area which the product is being purchased though.
Marketers have clarified that the cost of the product from the Dangote refinery should be close to this amount as this is the actual market price of the product.
Due to reasons that other marketers cannot obtain the US dollars, they have ceased importing petrol and the only company doing the importation is Nigerian National Petroleum Company Limited.
But the company’s Chief Financial Officer, Umar Ajiya, stated last week during the presentation of the audited report and accounts of NNPC for the 2023 fiscal year in Abuja that the oil company was saddled with a significant weight of subsidies on petrol imports.
He claimed that the NNPC had an agreement with the government and it has been providing PMS for retail distribution at around half of the landing cost.
He explained that the corporation had been using a reconciliation agreement between the government and the company to make up for the difference between the landing price and the sale price.
He claimed that throughout the past eight to nine years, the business had not given any money to marketers under the guise of a petrol subsidy.
The average landing cost is about N1,200 per litre, despite the official petrol pump price of approximately N600 per litre. In the first seven months of this year, Ajiya further stated that corporation had covered a “shortfall” of almost N7.8 trillion.
“I think there is one fact that I need to make very clear, in the last eight or nine years, this company, even as a corporation as it were, has not paid anybody a dime or one naira as subsidy.
“No one has been paid a kobo by the NNPC in the name of subsidy. No marketer has received money from us by way of subsidy,” Ajiya stated.
According to him, NNPCL is subjected by the law to market the petrol it imports for half the price of its landing.
He stated that sometimes the Federal Government foots the costs and might as well make a profit.
“What has been happening is that we have been importing PMS, landing at a certain price, and the government is telling us to sell it at half price. So, that gap between that landed price and the half price is what we call shortfall or we call it a subsidy,” the CFO explained.
The Federal Government’s committee, which was set up to oversee the execution of crude oil sales to regional refineries in naira, had come to an agreement with the Dangote Petroleum Refinery for the September 2024 launch of petrol, according to an article published by The PUNCH on August 20, 2024.
Additionally, the Federal Government stated that starting on October 1, 2024, crude oil will be sold to Dangote Refinery and other home based refineries.
A correspondent from PUNCH got a confirmation on Sunday from reliable and worthy sources in the oil marketing industry, the Federal Ministry of Petroleum Resources, and the White House, that the government and plant management will be talking about the $20 billion fuel expense in the upcoming weeks.
According to them, the government’s alternatives are to either enable Nigerians to purchase the product at the market price that the Dangote refinery will, undoubtedly, set, or to pay petrol subsidies without placing an additional weight on NNPC.
“The only way the government can intervene is to subsidise. There is nothing NNPC can do. I mean this. Do you want to kill the NNPC? Do you want the company to continue carrying the subsidy burden after the explanation it gave last week? It is not sustainable.
“Except you are saying NNPC will start doing whatever it can and nobody will expect profit from the company,” a source at the FMPR, who spoke with reporters on terms of anonymity due to lack of authorisation to speak on whether the NNPC would intervene in PMS price from Dangote, stated.
When asked to state a possible solution to the matter, the official replied, “The solution is for Nigerians to pay the real cost of petrol. But then you know, other things will come into play, because, you know, our economy is not that good. Things are not good for everyone.
“However, it is for Nigerians to pay the real cost of petrol or for the government to bring back subsidies. I don’t know, but it’s just those two things. They may consider this at the meeting, but for now the major discussions centre on crude supply in naira, which should be finalised in a few weeks.”
The source said the sale of crude to Dangote in naira had been concluded, emphasising that “his (Dangote) own portion will be sent to him. But they are still working on the framework, I know, we’ve been having meetings. So we’re having meetings. So hopefully, I think by next week we should be able to get a clearer picture on the modalities. We meet almost every two or three times a week.”
The source also stressed that the committee “will benchmark the exchange rate for crude sale to Dangote,” but also noted that one significant hindrance is the absence of the US dollar.
