After months of struggling to sustain fuel imports under the current foreign exchange regime, the Nigerian National Petroleum Corporation (NNPC) finally admitted monday that the sale of petrol at the current market price of N145 per litre was unsustainable due to the prevailing exchange rate.
NNPC also admitted that despite the preferential exchange rate made available to oil marketers to import petrol, many were reluctant to do so because they would be selling at a loss at the prevalent pump price, implying that NNPC that continues to import it was subsidising petrol.
This came as the House of Representatives pledged to review the laws on licensing, regulation and incentives on petroleum refineries in the country.
Speaking monday in Lagos at the 2016 Oil Trading and Logistics (OTL) Conference, the Group General Manager, Crude Oil Marketing Division at the NNPC, Mr. Mele Kyari, said there was no way petrol would continue to be sold at the current pump price.
Kyari was however quick to add that the present administration would not announce another increase in the petrol pump price, because Nigerians would not accept it.
According to him, legislation by the National Assembly would be required for petrol to be sold above N145 per litre.
He said some suppliers had already stopped importation because of the current pricing regime.
“We have a very difficult business environment. It is impossible today to import products at the current market price – at the curren foreign exchange rate. There is no way today you can take the product to retail and sell at N145. It is not possible today.
“If that is true and I believe that it is true because we all go to the market, why can’t we sell above N145? That is where legislation should come in,” Kyari said.
“I also know today that it is impossible for this government to announce tomorrow that petrol is about N150. This government cannot do it. That is the truth. The people will not take that number. That is why suppliers are not importing,” he added.
Kyari further argued that the scarcity of FX was not responsible for suppliers’ inability to import, adding that the NNPC had created “a niche FX market” for them.
“It is not FX. We have created a niche market for FX. I am part of the committee that allocates FX to marketers. But it is rejected, and the reason being given is that the FX is not enough to import. But that is not the truth,” he said.
According to Kyari, suppliers were refusing to import because they would be selling at a loss as long as the pump price is left at N145 per litre.
“The truth is that marketers go back to the international market and land the product here, that you are required to sell it at N145 maximum. I am sure they won’t make it. That is the main reason why people are not importing today. It is not FX,” Kyari explained.
He insisted that no marketer would import the product and make a profit if he sells at N145, stressing that marketers who currently sell below the N145 pump price do not import the product.
“Today, are we in a subsidy regime, absolutely. There is no way you can bring products today and take it and sell at N145 and get back your money, and make a profit. That is not possible.
“You can see some marketers saying that fuel is N138. It is because they did not import it. But someone has taken the heat; indeed, we (NNPC) have taken the heat, and you buy from us, so you can afford to go to the market and then put a ridiculous price. It is possible, because they did not import it.
“So the issue is not FX scarcity. As I speak to you, there is stranded FX that nobody is ready to pick. We have closed the chapter on FX,” Kyari explained.
Also speaking, the Speaker of the House, Hon. Yakubu Dogara, represented by the Chairman of the House Committee on Petroleum (Downstream), Hon. Joseph Akinlaja, stated that an amendment bill on the regulation and licensing of refineries had passed second reading in the lower chamber of the National Assembly.
According to him, the bill, when passed into law, will mitigate the bureaucracies and bottlenecks associated with the refining of petroleum products and also provide incentives to refinery operators.
“We are committed to reviewing and improving legislations, especially with regard to refining, gas, petrochemicals and a host of other key areas in the downstream sector operations in Nigeria,” Dogara added.
Chinese Investors Arrive Today
Meanwhile, 10 Chinese investors are expected to arrive Abuja today to hold discussions on the $5.5 billion investments in the oil and gas sector, THISDAY has learnt.
The delegation will comprise officials of China North Industries Corporation (NORINCO) and Tiger Jade, the investment arm of NORINCO.
Their visit, it was learnt, is a follow-up to the roadshow embarked upon by the Minister of State for Petroleum, Dr. Ibe Kachikwu, in China last June when he signed Memorandums of Understanding (MoUs) to the tune of $75 billion with numerous Chinese firms interested in investing in infrastructure projects in Nigeria’s oil and gas sector.
In addition to this, another MoU on incremental investments of $5 billion was signed with CNOOC and SINOPEC (formerly Addax) on their existing upstream assets in Nigeria.
Ahead of the visit of the Chinese team, Kachikwu yesterday inaugurated an inter-ministerial committee to review the MoUs signed during the roadshow.
THISDAY gathered from a source in the Ministry of Petroleum Resources that NORINCO and Tiger Jade officials will be seeking to hold further discussions on the MoUs that the Nigerian government signed with NORINCO on its interest in investing $5.5 billion in upstream oil and gas projects in Nigeria.
The source also confirmed that the minister yesterday inaugurated an inter-ministerial committee to review the MoUs signed in China.
The mandate of the committee, according to him, “is to look at each of the MoUs and the projects to which they are tied, and kick start the processes that would ensure that the $75 billion investment is brought to Nigeria”.
“Members of the committee include representatives of the Ministries of Petroleum Resources, Trade, Industry and Investment, Budget and National Planning, Finance, and Foreign Affairs,” the source said.
Others include the Office of the Solicitor General of the Federation, Debt Management Office (DMO), NNPC and the Infrastructure Concession and Regulatory Commission (ICRC), he added.
Kachikwu, last June signed the MoUs with several Chinese firms for over $80 billion new investments, spanning five years, in the oil and gas industry covering pipelines, refineries, gas and power, facility refurbishments and upstream financing.
The minister had told THISDAY from Beijing, China, that the agreements had been executed during his three-day roadshow in the Asian country to attract investments to Nigeria’s oil and gas sector.
The objective, he said, was to bridge the infrastructure funding gaps in the oil and gas sector.
He said: “I can confirm that we had a successful outing and finally raised investment commitments and signed MoUs worth $80 billion.
“Out of this, $10 billion approximately was raised on the sides with our steer and push for two Nigerian companies – Delta Tek and Salvic Petroleum – while the balance of $70 billion includes MoUs signed by investors and financiers for projects with the Nigerian National Petroleum Corporation (NNPC),” he had told THISDAY.
The 28-page China Investors’ Roadshow 2016 document obtained by THISDAY described Nigeria as a critical investment destination for China and also identified key incentives that make Nigeria an attractive investment destination for China.