NNPCL: We are Working to Resolve Supply Shortfalls, Blames Scarcity on FX Illiquidity
L-R: Permanent Secretary, Ministry of Petroleum Resources, Ambassador Nicholas Agbo Ella; Chairman, NNPC Ltd Board, Chief Pius Akinyelure and the CFO NNPC Ltd, Mr. Umar Ajiya, during the release of NNPC Ltd’s 2023 Audited Financial Statement (AFS) at the NNPC Towers in Abuja... Monday
· Says it prefers PMS price determined by market forces
· Announces provision of additional 17.6m barrels of crude oil to Dangote refinery
· NNPCL yet to lift our petrol, discussion still ongoing, says new refining facility
· Shettima meets Lokpobiri, Mele Kyari on fuel price increase
Deji Elumoye and Emmanuel Addeh in Abuja and Nume Ekeghe, Peter Uzoho and Oluchi Chibuzor in Lagos
The Nigerian National Petroleum Company Limited (NNPC) yesterday said it was working hard to resolve the current petrol scarcity being experienced across the country,
Executive Vice President, Downstream Operations, at NNPC, Dapo Segun also blamed the present shortages on foreign exchange illiquidity, distribution challenges, and the need to balance imports with existing debts.
Segun spoke during an interview on Arise News, the broadcast arm of THISDAY newspapers.
Although he stated that NNPCL was actively working to resolve the supply shortfall, Segun did not provide a specific timeline for ending the long fuel queues.
He emphasised that a significant challenge in the market was the reluctance to allow prices to be determined by market forces.
Segun said, “First, we have conditions that affect our ability to distribute fuel efficiently. We do have a constraint of FX illiquidity. And when you have that situation, you have to strike a very fine balance between the size of your debts and the volume of products that you import.
“It wouldn’t make sense to import so much more than you can reasonably and create a situation where your debts become unserviceable. So it’s a fine balance that we have to draw between those two, between those two – the size of the volume of PMS that we import and the size of our payables that’s mainly driven by FX liquidity.”
He added that even with debts owed, the suppliers trust that they would pay, insisting that NNPCL has a good business relationship with all its foreign customers.
Segun stated, “We have a good relationship with our suppliers. And as we speak, we don’t have a problem with the supplies coming in. We do have a challenge with payments, and that’s largely due to the fact that there is some FX illiquidity, as it’s obvious, and that’s really is the challenge.
“As much as we are able to, we are making payments to them and talking about the debts. I wouldn’t want to go into that issue, but yes, there is a debt. There may have been a denial of the exact amount that was posted in the media.
“Yes, there is a debt. It’s not news to anyone, but we’re doing all we can to make sure that we retain the confidence of our suppliers, and I can assure you that our suppliers have confidence in our ability to pay.
“NNPC has never defaulted in making its payments, and that’s why suppliers continue to back us up.
“The good thing also is that we have Dangote refineries coming up with production, as it’s been announced, and that will also provide a source of supply into the country.”
He stated that as a confirmation of its good faith, NNPCL had supplied the Dangote refinery over 30 million barrels of crude oil in the past, with 17.6 million barrels to be made available in the coming months.
Segun explained, “We have provided over 30 million barrels of crude oil to Dangote refineries so far. This month alone, we will be providing 6.3 million barrels of crude oil to Dangote refineries in seven cargos, and in October, we’ll be providing another 11.3 million barrels of crude oil to Dangote refineries in 13 cargos. So we’re doing everything we can to make sure that this situation abates as soon as possible.”
He added that Section 205 of the Petroleum Industry Act (PIA) said fuel prices should be determined by unrestricted market-based conditions.
Segun said while the government might intervene with policies where it deemed fit, the sustainable approach was to allow for free market pricing of petrol.
He said, “In section 205 of the PIA, it should be free markets, unrestricted market-based conditions. Government policy would come in, and that happens as the government would deem to bear some of that, where the government deems it necessary.
“What is sustainable is the unrestricted free market pricing of PMS. That way competition takes over, and Nigerians will get it better.”
He did not give a deadline regarding neither the end of the long fuel queues nor commencement of production by NNPCL refineries, stressing that projections can always go wrong.
According to Segun, “Even when you give projections, projections are at best estimates at any time. And if you look at even the best analysts in the world, when they give their projections, they put a disclaimer there and say, this is subject to change. There’s a limit to how much into the future you can see.”
Similarly, speaking on TVC News’ “Journalists’ Hangout”, Segun explained that NNPCL favoured determination of prices by forces of demand and supply, rather than government interference.
He said, “The market has been deregulated, meaning that petrol prices are now determined by market forces rather than by the government or NNPC. Additionally, the exchange rate plays a significant role in influencing these prices.”
On the commencement of lifting petrol from Dangote refinery, Segun said NNPCL was awaiting the September 15 timeline provided by the refinery.
Segun, who said no right-thinking individual would be comfortable with the current fuel scarcity, added that NNPCL had nearly a thousand filling stations nationwide and was collaborating with marketers to ensure that stations opened early and closed late.
Dangote Industries, yesterday, refuted reports that NNPCL had started lifting petrol from its 650,000 barrels per day refinery. It said the national oil company had not yet commenced lifting the product from the facility.
Dangote Group also debunked reports that it was selling its petrol for N897 per litre.
Group Chief Branding and Communication Officer of Dangote Group, Mr. Anthony Chiejina, made the clarifications in a statement.
Chiejina said the issue of fixing the price of petrol lifted from the refinery did not arise, as the group was yet to finalise its contract with NNPCL regarding lifting of petrol from the facility
He said, “We would like to state that NNPC has not commenced lifting of refined Premium Motor Spirit (PMS), commonly known as petrol, from our Dangote Petroleum Refinery. Therefore, the issue of fixing the price of petrol lifted from our refinery does not arise, as we are yet to finalise our contract with NNPC.
“The PMS market is strictly regulated, which is known to all oil marketers and stakeholders in the sector, hence, we cannot determine, fix, or influence the product price, which falls under the purview of relevant government authorities.”
Chiejina added, “We urge the public to disregard the headline, as it is misleading and does not represent the true position in this matter.
“We are guaranteeing Nigerians of exceptionally high quality petroleum products that will be readily available all over the country.”
NNPCL had on Tuesday increased the pump price of petrol from the official N617 per litre to N897, while marketers raised theirs to between N930 and N950 per litre and even higher, depending on location.
Vice President Kashim Shettima met with Lokpobiri and Group Chief Executive Officer of NNPCL, Mele Kyari, at State House, Abuja, over the petrol price hike.
Other who were at the meeting included National Security Adviser (NSA), Mallam Nuhu Ribadu, and Executive Director of Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Mr Farouk Ahmed, who was represented by Mr Kalu Okuoha.
Lokpobiri told reporters after the meeting, “The vice president summoned us and we’ve been with him to brief him about what is going on across the country. And what is important is for us to convey to Nigerians that the president is empathetic about what is going on in the country.
“He is concerned about the hardship of Nigerians, and that was why he directed the vice president to call this meeting, for us to reflect on what is going on in the country.
“What is important is that products are available in the country, and we believe that between now and the weekend, there will be availability of products across the length and breadth of the country.
“The price could be high in some areas, much higher in some other locations, and in some locations, much more than other areas. But we believe that by the time there is availability of products across the country, the price itself will stabilise.
“But what is important is that government is not fixing prices. This sector is deregulated. And we believe that with the availability of products, the price will find its level. And this is important for Nigeria to know.
“The summary is that the president is empathetic about what’s going on. That’s why he directed this meeting. There is enough product in the country to be able to meet the demands of Nigerians. There should be no panic buying. And we also believe that Nigerians need to know that government is not fixing prices. That is what I want to convey to Nigerians.”
Ahmed said, “All regulatory efforts are now geared towards stabilising supply, with a resultant impact that it will be positive also on the stability of price.
“To that objective, the regulator is ensuring that there’s increased operating hours from all loading depots; vessels are being cleared promptly and extended hours where safety can permit for truck-outs as well.
“More importantly also is the reinforcement of the support being given to local refiners because with increased production from them, indeed, like the minister has said, there will be higher supply, which will stabilise the price. That’s the effort that the regulator is making.”
President of the Nigeria Employers’ Consultative Association (NECA), Dr. Ifeanyi Okoye, warned that the recent increase in the price of PMS was not good for businesses and Nigerian workers. Okoye stated this yesterday during an interaction with journalists in Lagos.
He called on the federal government to allow more investors to play in the industry, just like Dangote Group.
Okoye also acknowledged that the issue of subsidy had contributed to corruption in the petroleum sector.
According to him, “It’s really unfortunate, I mean, nobody expected the fuel price increase. We expected that with the new salary presented to labour, at least things will start getting better and better.
“Unfortunately, this has come up and I don’t think that it is good for Nigerian workers, including the employers, and the government has been saying that the Port Harcourt refinery will soon start working, and we’ve all taken that as already done. But today we’ve not seen the Port Harcourt refinery do anything.
“So I think for Nigerian employers, and, of course, the labour themselves, it’s not something very acceptable. But we hope that something will be done by the government about it, we’re looking forward to something to happen.”
Okoye also shared his opinion on whether the government had deregulated petrol price fully.
He said, “I don’t think government has made it clear that they will be dictating the price. But we know that according to the government, it has regulated the price of fuel, made it free for all, so they don’t have right again to start talking about dictating the price to Nigerians.
“If there is need, or if they have any reason to start interfering again on the cost of fuel, that means the fuel has not been deregulated. And the way it’s going, I don’t think that the fuel price is fully deregulated, according to what the government said originally.
“They would believe that there are steps to get this fuel price stabilised, and maybe directly monitor the dealers, especially as Dangote has just come up, to ensure they don’t rip-off Nigerians.
“I would want to believe that is what the government is looking at. But for the government to say they have not deregulated, I don’t think it’s acceptable, because it has been announced openly to the people, and the people have accepted it. But the way things are going, it looks like a joke.”
However, a group, The Democratic Front (TDF), said Tinubu did not betray or deceive the Nigeria Labour Congress (NLC) on fuel price in arriving at the N70, 000 minimum wage.
TDF said labour and government mutually negotiated and agreed on the minimum wage.
In a statement signed by its Chairman, Mallam Danjuma Muhammad, and Secretary, Wale Adedayo, TDF maintained that the president could not have been emphatic and decisive on the pump price of fuel in a deregulated market.
TDF said, “Once again, we are disappointed with the often repeated wrong postulations of the Joe Ajaero-led Nigerian Labour Congress against the government and person of President Bola Ahmed Tinubu.”
It claimed most of what NLC said did not add up.
The pro-government group said, “In a rather disheartening and incoherent manner, Mr. Joe Ajaero signed a statement alleging that President Bola Ahmed Tinubu betrayed the labour congress with the recent increase in the pump price of PMS by the NNPCL.
“The negotiation of the minimum wage was never debated as a condition to how much fuel would be sold.
“It is pertinent to state that President Tinubu never hid his desire or pretended over his preference to make the ideals and philosophy of a liberal free-market economy the focal point of his economic transformation agenda
“As a matter of fact, he announced an end to the age long petroleum subsidy regime in an unprecedented fashion, during his inaugural speech on 29th of May 2023, to herald the commencement of the end of state-controlled economic policies and protectionism in the Nigeria investment ecosystem.”
