Nigerians Will Be More Prudent With Fuel Consumption When Subsidy Is Removed—Kyari

The fuel consumption figures in Nigeria will reduce by the time Nigerians start paying the market value of Premium Motor Spirit when fuel subsidy is removed, the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited, Mele Kyari has said.

The NNPC GCEO said this on Tuesday at the PENGASSAN Energy and Labour Summit held in Abuja.

This is coming few days after a former Central Bank of Nigeria Governor and Emir of Kano, Sanusi Lamido Sanusi called for tougher measures to address Nigeria’s revenue woes.

Sanusi had said the 66 million daily fuel consumption figures released by the NNPC Ltd is “unbelievable.”

At current conditions, Nigeria will spend at least N6trn every year to pay subsidy for the importation of petrol products.

Subsidy had been criticized with the NNPC Ltd boss saying that it is elitist.

Millions of litres are smuggled outside the shores of the country by marketers to get higher returns.

But at a time when the country’s revenue woe is stifling economic activities, Kyari believes removing the subsidy will eliminate the arbitrage.

The NNPC boss said when the subsidy is removed, people will begin to buy only the fuel and products they need.

He also said that those who have more than one car may decide to park one, adding that at that point, the leakages will disappear.

“What will happen is that there will be no further incentive for cross border smuggling and more than anything even the marketing companies will have no enough resources to go to the depots to buy. And when it comes to the fuel stations, some of you have two cars everybody will park one. This will happen. It is very natural.

“Then we will come down to the real level of consumption which is that people will only buy what they need. Today we buy what we don’t need and it is very difficult to stop it,” he added

Making a case for the consumption figures, Kyari said at any point the company cuts evacuation below 60 million litres, the effect was fuel queues.

He said, “Today, our evacuation, let me make it very clear, I’m sure maybe you have heard a lot of things on the media. What we know is that evacuation from the depot is 66 million litres per day any time.

“Anytime you bring down the evacuation to below 60 million litres, you will see scarcity on the streets. So, it is a clear indication that the evacuation from the depot is reflective of our consumption level but not our exact consumption figures.”

Kyari admitted that there are leakages in the process as subsidy incentivizes smuggling of petroleum products when sold in neighboring countries.

According to him, it cost N371.3 per litre to import fuel, while the product is being given to oil marketing companies at a subsidized rate of N118 per litre.

He explained, “Are their leakages? yes, there is no doubt about it. We admit that whenever you have an arbitrage situation, you will have issues. You will have cross boarder issues. You will have internal issues.

“You can’t avoid it. For instance, today, if you going to the market today to sell petroleum product, you will be at N371.3, we are transferring to oil marketing companies at N118 to the litre so that they will be able to sell at N165 or N170 at the pump. There is no other way of doing it.

“That means the difference between N118 and N371 is the burden carried by the State, it is not by the market and a simple number round this will tell you that we need about N6trn every year minimum to cover this gap at current market condition.

“Of course, this is crude and we all know that it can change and prices can collapse tomorrow. In today’s circumstances, this is what we are dealing with.”

He stated further that the NNPC Ltd is working with security agencies to curb smuggling and other arbitrage in the usage of subsidized fuel.

Kyari said, “Can we control the volume? Yes. Is it something that we can do tomorrow? No. Are their actions taken by the regulators? Absolutely yes, I’m aware there are a number of interventions that are going on to see how we can contain cross border smuggling, internal leakages and number of interventions with government security agencies the EFCC, DSS to help us cut this down.

“Are we in full control? Absolutely not. As we all know, you see fuel stations all across this country. I’m not sure all of them have regular registration.”

He explained that at border towns there are several fueling stations established to carry out smuggling activities.

The NNPC boss added, “ Most of the border cities that we know every border city has more fuel stations than it requires. No exceptions. Villages or towns that requires just four fueling stations will have 30 to 40 and you can’t stop it because they are by law, they apply to set up business and you can’t stop businesses.

“Nothing stops anyone to come with Jerrycan, buy fuel and take it out. So, the only remedy is reducing the arbitrage. And we also recognise in this country that there are stack economic realities. A broad shift in energy supplies can mean a catastrophic distortion. We understand this, every country in the world is making decisions around this, reducing tax rate on petroleum products.

“Everybody is doing something to ensure they cushion the effect of high prices. But is it something you can continuously do? Absolutely no. That is why we need to have the conversation and have a transition around this so that ultimately, we can reduce the arbitrage. As soon as you are able to reduce the arbitrage, you will see those evacuation will go down.”