Home News Price differentials fuelling petrol smuggling, subsidy to resurface in 2022 budget—NNPC

Price differentials fuelling petrol smuggling, subsidy to resurface in 2022 budget—NNPC

by Business News Report

The Nigerian National Petroleum Corporation (NNPC) has said that concerted efforts by the Corporation and some Federal agencies to combat the menace of smuggling of petroleum products have been largely hampered by existing arbitrage fuelled by the prevailing huge price differentials in pump price of petrol in Nigeria and neighbouring countries. In a presentation at an interactive session by the Joint Senate Committee on the 2022-2024 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP),  Group Managing Director of the NNPC, Mallam Mele Kyari, said with a price difference of over N100 per litre between what is sold in Nigeria and in countries around the nation, it was difficult to cage the activities of petrol smugglers. 

On Wednesday, GMD of NNPC, Mallam Mele Kyari addressed the Joint Senate Committees on Finance, National Planning, Foreign & Local Debts, Banking, Insurance & Other Financial Institutions, Petroleum Resources (Upstream), Downstream Petroleum Sector, and Gas, on the 2022-2024 Medium Term Expenditure Framework (MTEF) & Fiscal Strategy Paper (FSP).

The NNPC GMD said though the Corporation, working in concert with other agencies, has made noticeable progress in combating the menace, the battle was yet to be won. “As long as there is arbitrage between the price that you sell and what is obtainable elsewhere, you can be sure that it is very difficult to contain the situation,” he said. He emphasised that the activities of smugglers have also made it difficult for the country to determine the actual consumption figures for petrol, noting that the Corporation can only know what was trucked out from loading depots across the country but cannot determine how much of that was consumed in-country. On the MTEF assumptions, the GMD reiterated a base oil price scenario of $57 per barrel for 2022, $61 per barrel for 2023 and $62 per barrel for 2024 predicated on  a base national production of 1.883 million barrels per day in 2022, 2.234 million barrels per day in 2023 and 2.218 million barrels per day in 2024.   

Kyari said that the assumptions were arrived at after consultations with the Ministry of Finance and other relevant stakeholders while also undertaking a careful appraisal of the three-year historical dated Brent Oil Price average of $59.07 per barrel premised on Platts Spot Prices among other considerations. He reiterated that price growth was to be moderated by the lingering concerns over COVID-19, increased energy efficiency as well as obvious switching due to increased utilisation of gas and alternatives for electricity generation.  The Senate Joint Committee session was chaired by Senator Solomon Adeola, with members drawn from the Senate Committees on Finance, National Planning, Foreign and Local Debts, Banking, Insurance, and other Financial Institutions, Petroleum Resources Upstream, Downstream Petroleum Sector and Gas.  

Federal Government has said that it will make provision for petrol subsidy as part of its expenditure in the 2022 budget. This follows the non-resolution of the grey areas and outstanding issues between the federal government and the organised labour on the implementation of the full deregulation of the downstream sector of the oil industry. This disclosure was made by the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mr Mele Kyari, on Wednesday at a public hearing organised by the Senate Committee on Finance on the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP). Kyari told the lawmakers that although no provision was made for fuel subsidy in 2021, the government is presently consulting with relevant stakeholders to exit the subsidy regime.

The NNPC boss, however, stated that the process may not be concluded anytime soon, hence the need to reintroduce subsidy in the 2022 budget. Kyari had earlier while appearing before members of the House of Representatives Committee on Finance for a similar hearing on the 2022-2024 MTEF/FSP, disclosed that Nigeria would stop the importation of petrol, when the Petroleum Industry Act (PIA) comes into full effect, and when the Dangote Refinery kicks off operations. He also justified the federal government’s decision to take up equity in Dangote Refinery while answering questions, describing it as well thought out as the nation now has a venture that will ensure the production of millions of litres of petrol in the country.

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