JANUARY 9, 2018 – Federal Government is mulling a plural fuel pricing regime, under the arrangement of the Nigeria National Petroleum Corporation (NNPC), that they would sell at N145 while independent marketers would import and dispense at their own rate, making it two different fuel price.
Dr. Ibe Kachikwu, minister of State for Petroleum Resources who made the revelation when he appeared before the Senate Committee on Petroleum Downstream also revealed that the current scarcity might linger till June 2019, when government-owned and private refineries would fully come on stream.
Other recommendations Kachikwu proffered as possible solution to the fuel crisis, which peaked during the Yuletide included a special foreign exchange price modulation as well as special tax consideration for independent oil marketers to reduce their financial burden.
He said if any of the three recommendations was adopted, fuel scarcity would be temporarily handled until refineries come on stream.
In addition, Kachikwu also called for a better border policing, arguing that since it was more lucrative to sell PMS in neighbouring countries, marketers will likely divert their products to those places.
“What this country needs is to ensure that the refineries work. It is shameful that after more than 50 years, we still do not have working refineries. Selling crude is like selling raw agricultural materials. Once the private refineries start working, this scarcity issue will be behind us. Before we get there, we have 18 months to manage this problem.”
Kachikwu who was accompanied by Mr. Maikanti Baru, group managing director (GMD) of the Nigerian National Petroleum Corporation (NNPC), and other officials of his ministry, on behalf of President Muhammadu Buhari, apologised to Nigerians for the difficulties they went through over the fuel scarcity during the festive seasons.
“Our sympathies go the Nigerian people. I will not say much,” he stated.
While still testifying before the senate committee which cut short its recess to investigate the fuel crisis, Kachikwu added: “All I can say is that there are lots of issues. The major players stopped importation because of the price difference in landing cost. Once that happened, NNPC started providing 100 per cent products to the local market.
“There are issues on ground. Some are due to non-payment. Whenever situations like this arise, other issues arise. People moved products to other countries and decided to hide the products. We had to move in and release these products.
“What this says, for me, is that the business model of oil is not where it should be. If the prices of refined products escalate internationally, we do not react when we should. When it increases internationally, it has its own effects here. Between now and 2019 when our refineries will start working, we will have to rely on importation,” he added.
Speaking on the three recommendations, he said: “During the 18 months emergency period, we need to look at pricing. We need to find a way to get marketers back to importation. Landing cost is about N170-175. We sell at N145. We need to address this problem. There are series of items. But the key item is the international selling price for sale of refined product.
“There is a gap. How do we deal with the gap? Whatever we do, we need to free the marketers to do their business.
Exchange rate was N145 when price was tagged in 2015. One model is for the CBN to create a special exchange rate for independent oil marketers to import their products. This will help.
“Is there a way to grant tax holiday for them? Government can look into the taxing system. If they do that, marketers will have more funds to import products. Potential of having a plural pricing system? That is, NNPC outlets can sell at N145, while independent marketers can import at their rate and sell at their own rate. Until we deal with this issue, we will not get out of the problem.
“We have not been able to deal with the issue of border policing. It is still more lucrative to sell this product outside the country. I am proposing that trackers be placed on trucks leaving the depots. That is one way to deal with this issue.”
