Nigerian Economist Kelvin Emmanuel has said that if the Nigerian government and the Nigerian National Petroleum Company Limited (NNPC) follows the template that Dangote Refinery uses, it can save up to N471 billion every month in payments that would have otherwise gone into fuel subsidy.
Emmanuel said this in an interview with ARISE NEWS on Friday while discussing the reasons for the several increases in prices of PMS and other petroleum products, where he also said that the Presidential CNG Initiative to alleviate hardship caused by the removal of fuel subsidy will not work as its fundamentals are wrong.
He highlighted that NNPC, as the sole buyer of fuel from Dangote Refinery, is profiting from sales to independent marketers while not paying any subsidies on those rates, saying, “NNPC says they’re the sole buyer to the Dangote refinery because of course they are the state oil company in Nigeria. NNPC is making a profit on the stock that they sell to independent marketers, and I dare tell you that at the rate they are selling to independent marketers, they are not only making a profit, they are not paying any subsidy on that rate. And that if we follow the Dangote Refinery template, Nigeria will be saving N471 billion every month in payments that would have gone into subsidy.”
Emmanuel further noted that the logistical challenges are not the fault of Dangote but the government’s inefficiencies as he said, “It’s not the fault of Aliko that NNPC does not have cash to pay and they have to go to the bank to raise an LC and the financing cost of about $28 per metric ton has to be passed to the consumer. It’s not the fault of Alhaji that you have bulk terminal fee, you have/ shuttle fee, there is no pipeline infrastructure to evacuate PMS around Nigeria. It’s not the fault of Dangote that the government has built in NMDPRA fee, it has built in distribution, it has built in inspection fee, it’s not his fault.
“So, when you look at this template, you’ll realise that NNPC is trying to eat its cake and have it back. It wants to be the sole buyer selling to the marketers at a profit, and it’s refusing them to go directly to the refinery. It doesn’t want to deregulate the market. Port-Harcourt refinery turnaround maintenance has failed, and then last month it imported 1 billion litres of PMS or 814,000 metric tonnes of PMS, and it has booked cargoes until December of 2024. It’s not the fault of Dangote.”
Emmanuel also raised doubts about the government’s reported figures on daily petrol consumption, saying, “I refuse to believe the government when they say that the numbers from 2010 jumped from 29.1 litres per day to 70 litres per day. There’s no empirical evidence to show. What I expect the NLC to ask Mr President when they meet him in person is let the government provide empirical evidence to justify the subsidy he is paying on 55 to 70 million litres per day because there is no evidence to show. If you can find a true north for the daily consumption of Nigeria, which in my estimate is not more than 35 million litres per day, then the government will be able to understand how it can apply an under recovery.”
Regarding fuel prices, he then said that concerning the issue of petrol price, the sticking point has been the exchange rate.
“The government is borrowing more money to fund its budget, and because it’s borrowing more money to fund its budget, it had the past governor of the CBN tap Ways and Means, increased CRR, it created money that didn’t exist- 17.3 trillion not backed by any assets and reserves, and that led to devaluation and depreciation of the naira. So, when you consider the fact that your fuel importation is linked to your exchange rate, you see why the price of PMS has gone from under N200 per litre within the past 5-6 years, it’s gone to N1,000 per litre, so these are the issues.
“And then, we have to come back to the fact that today as we speak, the X refinery price for the Dangote refinery is actually cheaper than the cost of importing substandard fuel into Nigeria. These are realities that the NLC needs to face, and these are the questions they need to ask the President one on one when they meet with him,” he said.
“If you go and ask Dangote refinery for the quotes on 80k Jet A1 on diesel, AGO, they will give you a quote. For PMS, NNPC has not put out an official statement in line with section 205 of the PIA that says that we’re effectively deregulating downstream for PMS, they haven’t. Until that is done, the Dangote Refinery cannot give you a pricing template or framework because the government currently regulates the price of PMS in Nigeria- that has not been done,” he added.
Emmanuel voiced concerns about the Presidential CNG Initiative, asserting that it is based on faulty fundamentals as he stated, “You don’t have high pressure transmission pipes around Nigeria to deliver gas. There’s also the problem of willing producers price pact versus government regulated price pact for gas pricing midstream and upstream that is making you have low pressure on pipes for delivering gas to gas based industries. These are the issues that the government needs to tackle on an institutional level, and that’s the reason why I’ve always said the presidential CNG initiative is putting the cart before the horse and it’s not going to work because the fundamentals are wrong.”
Ozioma Samuel-Ugwuezi
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