Group Chief Executive Officer of the Nigerian National Petroleum Company Limited, Mallam Mele Kyari has said that the current petrol consumption in the country will decline when there’s no incentive for excess consumption.
Kyari who spoke at the Petroleum and Natural Gas Workers Association (PENGASSAN) summit in Abuja, stated that it will happen when prices are deregulated.
Nigeria’s controversial fuel subsidy regime has been an issue for debate for years , as many believe the figures do not add up. The country has budgeted about N6 trillion for the purpose this year.
According to Kyari when the subsidy is removed, people will begin to buy only the fuel and products they need, adding that those who have more than one car may decide to park some, thereby reducing excess use.
“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 maintained.
Kyari added: “Today, our evacuation, let me make it very clear, I’m sure maybe you have heard a lot of things in 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.”
While admitting that there are leakages in the system as subsidy incentivises smuggling of petroleum products when sold in neighbouring countries, the GCEO, said it currently costs N371.3 per litre to import fuel, while the product is being given to oil marketing companies at a subsidised rate of N118 per litre. This means that the product is being subsidised to the tune of over N253 per litre.
He continued: “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 go 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 N6 trillion 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,” Kyari noted.
Kyari noted that the NNPC Ltd was working with security agencies to curb smuggling, noting that a number of interventions were ongoing to stop leakages.
“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.
According to him, most of the border cities have more fuel stations than they require, explaining that for instance villages or towns that require just four filling stations have as much as 30 to 40.
“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 stark 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,” he maintained.