The Nigerian government will not increase the pump price of petrol despite a demand that it should do so, officials have said.
The forum of former Group Managing Directors of the Nigerian National Petroleum Corporation, NNPC, on Sunday called for the price increase by calling for a removal of price cap in the pricing template.
A removal of the price cap would mean that marketers would be free to sell petrol at their desired price, based on several factors such as the exchange rate and international crude price. With the Naira exchange rate going down by over 50 per cent to about N412 since the current petrol price was fixed, approving the recommendation would have meant Nigerians pay more for petrol.
The Nigerian government through the Petroleum Products Pricing Regulatory Agency, PPPRA, however, said on Monday that it will not accept the advice.
The former GMDs had in a 12-point communiqué at the end their meeting with the incumbent GMD of the NNPC, Maikanti Baru, said the price cap of N145 per litre of petrol was “not congruent with the liberalization policy.”
The removal of the cap under a liberalised market environment would allow marketers of petroleum products to sell products at any price to enable them recover cost.
The Forum said the current ceiling price of N145 per litre did not factor the current foreign exchange (FOREX) rate and other price components of the pricing template, like crude oil cost and Nigerian Ports Authority (NPA) charges, which remain uncapped.
While stating the government’s response, the acting Executive Secretary of PPPRA, Sotonye Iyoyo, said the proposal was the personal opinion of the former state oil chiefs.
“If it was a recommendation, that is what it is – a personal opinion. I’m not aware government is planning any fuel price increase. We are in a liberalised market already,” she told PREMIUM TIMES.
The spokesperson of the NNPC, Garba Deen Mohammed, also described the advice as an “opinion.”
“The forum was expressing its opinion, which it is entitled to,” Mr. Mohammed told PREMIUM TIMES. “NNPC is a player in the petroleum industry and has a right to have its views about the industry. Nobody is bound by the opinion.”
First line charge
In the communiqué, the forum also asked the federal government to include funding of joint venture operations as first line charge to guarantee sustainable oil and gas production and national reserve growth.
The industry has, for years, been contending with challenges of dwindling investments to grow production and national reserves, due to inability of government to meet its funding obligations to the joint venture regularly.
The meeting also reviewed issues affecting operations of the oil and gas industry as well as recommendations to resolve them.
The issues include the insecurity in the Niger Delta, NNPC’s poor corporate reputation, poor state of the country’s refineries, current state of petroleum products supply pricing template, and need to focus attention on the Chad Basin in the ongoing frontier oil exploration activities in the northern part of the country.
Other issues include operations of the National Petroleum Investments Management Services, NAPIMS; Petroleum Industry Bill, PIB; NNPC’s relationship with its partners; NNPC’s dwindling revenue base and rising debt profile as well as its widening pension funding gap.
During the meeting, Mr. Baru presented the status of NNPC’s finances and the state of the oil and gas industry, spanning his management’s 12 business focus areas towards restoring the corporation on the path of growth and profitability.
In its review of the current state of industry and ways to resolve issues militating against its progress, the meeting was concerned about declining production levels and the consequences on the country’s revenue.
On insecurity, the meeting noted the threat to oil production and damage to the Niger Delta environment. It said there was need for government and security agencies to refocus their engagements with the various host communities to build sustainable partnership toward a lasting solution to the problem.
The former GMDs urged government to ensure the refineries were refurbished using the Original Equipment Manufacturers (OEMs), while their operations were restructured as Incorporated Joint ventures (IJV) modelled after the Nigerian Liquefied Natural Gas (NLNG), with credible technical and financial partners.
The meeting also asked the government to ignore the proposal in the draft PIB for an NNPC investment subsidiary, NAPIMS, to be removed from the state oil firm. it said that would inhibit its effective function as a national oil company in comparison with its peers in other countries.
On its dwindling revenue base, the former GMDs said they were concerned with the situation and called for particular attention to be focussed on revenue generating entities – the Nigerian Petroleum Development Company, the retail arm, and the refineries – to restore its growth and profitability.
Worried by the high level of NNPC’s debt profile, the former oil chiefs urged its management to urgently ascertain its true financial status and immediately decide on the most appropriate capitalization model.
“If the current situation remains unchecked, it could lead to the crippling of the corporation and the nation’s oil & gas sector, the mainstay of the Nigerian economy,” they said.