… As NNPC, others to pay same FX rate
The Group Chief Executive Officer, Nigerian National Petroleum Company Limited (NNPCL), Engr. Mele Kyari has revealed that the subsidy budgets of N6 trillion in 2022 plus N3.7 trillion for 2023 up to half a year is yet to be paid to the company.
Kyari said this in an interview with Arise TV during “The Morning Show” on Thursday in Abuja, noting that NNPC is expected to pay taxes and royalties as any other companies as required by law in order to declare profit with its shareholders thus became part of the reason for the upward in prices.
Revealing the implications for subsidizing fuel, the Group CEO said in order to sustain the in flow of petrol into the market space, funding have to be coughed out from the cash flow of the NNPC which is taking a toll on the company.
“First of all stock is different from pricing and you have to be sure that there’s enough stock to guarantee continues supply. This is the provision of the law that NNPC most guarantee energy supply sufficiency for this country. Another part, is that you most have continues supply which comes from market suppliers and those who make the product available whether locally refined or imported from other jurisdictions, you must pay for it.
“However, the Petroleum Industry Act (PIA) clearly stated that subsidy regime will terminate latest by February 17 2022 but in the fiscal 2022, government decided to subsidize petrol and NNPC executed the will of government even up to 2023 half of the year to enable continus supply at a subsidized rate even as it was not as prescribed by the PIA.
“The implication is that you can make provision in the budget but you have to finance it and that financing part of it is arm’s tell but I can tell you since 2022 when that provision was made, not a single Naira was paid to NNPC and the implementation of this, is that we have to take from the cash flow of NNPC to continue to supply petroleum into the country and is becoming a daunting task almost now, almost impossible for NNPC to continue to bear the cost.
“Therefore, when we saw the alignment of government with the realities of the law and with the very fact that government does no long have the money to fund it, that means it is eliminated by the facts of the law and with the realities that government don’t have the money anymore and this is the situation we have found ourselves, we will sell this product at the market price so that we will be able to continue to supply product into the market and also avoid any potential default.
“This is nothing to do with anything else other than the fact that we are just observing the rules of the game and that of the law of the federation”, said the NNPCL Group CEO.
Kyari further explained that the upward in prices simply demonstrate the realities of the market that applies to every commodity and not just on petroleum hence nothing strange about it as it is stock management issues which could also allow downward of the product pricing and those with the old stock would have sold theirs at lower prices to arrive at market condition.
Acknowledging Company’s efforts in the short period of time, the Group CEO disclosed that NNPC had pumping level with huge cost of N687 trillion in the fiscal 2021 yet cannot make the dividends available to shareholders because there is the burden of subsidy which most be financed and by this, government was supposed to pay to NNPC for its service rendered to the nation. “That check has not been written at all”.
“Since there’s nothing we can do, we held back the fiscal obligations. Despite the fact we are holding back the fiscal obligations for year 2022 and half of 2023, there is a net deficit of N2.8 trillion that the production should have written check for us. Therefore, you have the budget, absolutely there’s a provision but you do not have the cash to back it up and you also do have the fiscal obligations that should have come from the NNPC to settle this, definitely you can’t give what you don’t have.
“We can not wait for subsidy because there’s a ticking clock that doesn’t stop because the moment it stops that whole energy system of the country will stop and therefore it won’t wait for subsidy. If we continue to with this, it will go to a default point where we will not be able to produce even if it is process locally there will be no distinction in the cost of FX”, he noted.
Commenting on whether prices would drop to a lower level, Kyari said, the current prices of fuel at all its stations reflects the market price of the commodity which demonstrate also that prices will fluctuate at anytime and market will definitely regulate itself, there by paving way for oil marketer to join to breed competition in the market space for all.
Kyari further stated that by this, the requirement of energy security as indicated in the law, NNPC will be able to have maximum of 30 per cent of products in stock in the country as well as eliminating monopoly and also enhance efficiency across the value chain.