CEM REPORT, ENERGY | It appears that the challenges plaguing the nation’s petroleum industry is far from losing grip. After the removal of subsidy on petroleum products, the federal government granted licences to companies to import the product as a means to deregulate the market, however, the nation’s FX crisis has rendered the policy inefficacious.
The Nigerian National Petroleum Company Limited (NNPCL) has since remained the sole importer of petrol, as licenced companies are faced with foreign exchange (FX) accessibility to import petrol.
According to Mele Kyari, Group Chief Executive Officer, NNPCL, the company is the sole importer of petrol since private companies cannot access FX due to shortage issues.
“We are the only company importing petrol into the country. None of them can do it today. For them, access to foreign exchange is difficult. We create foreign exchange (FX), therefore we have access to FX, while their access to FX is limited.”
Kyari said this during the ongoing Energy Labour Summit organized by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) in Abuja.
Recall a CEM earlier report, where the Minister of Finance, Wale Edun said the FG is seeking FX funding from the World Bank to address the FX crisis in the nation, adding that the administration intends to seek zero-interest funding.
“We were meeting with the World Bank. As we know, this is a time of very tight foreign exchange liquidity. So, it must be sought and found wherever.
“And one of those cheap and viable ways is foreign exchange funding, which virtually comes free. A lot of it has zero interest from the World Bank, a multilateral development institution set up to help developing countries such as ours.”
While this is still in the works, the nation is by implication returning to a petrol regulated market as against President Bola Ahmed Tinubu’s administration’s plan to deregulate the market. This means NNPCL will remain in control of the petroleum market.
Meanwhile, the National President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) Festus Osifo stated the Federal Government is still paying subsidy on petroleum.
Speaking on Channels Television’s Politics Today, he explained that with the cost of crude oil in the international market and the dollar to naira rate, the government still pays subsidy to keep the product within the current retail rate
“In reality today, there is subsidy because as of when the earlier price was determined, the price of crude in the international market was somewhere around $80 for a barrel. But today, it has moved to about $93/94 per barrel for Brent crude. So, because it has moved, then the price [of petroleum] also needed to move.”
Osifo, who is also the president of the Trade Union Congress (TUC), stated that for the government to completely seize subsidy payments, it must resolve the FX market crisis.
“The only reason the price will not move is when you are able to manage your exchange rate effectively and you are able to pump in supply and bring down the exchange rate,” Osifo maintained.
“So, if the exchange rate comes down today, we will not be paying subsidy. But with the exchange rate value and the price of crude oil in the international market, we have introduced subsidy.”
The FX crisis has continued to rise its tormenting head in every sector of the economy crippling investment in these sectors and rendering policies inefficacious. The CBN has raised the interest rate severally to curb inflation however the FX crisis has defeated that policy as food inflation has remained on a constant rise.
