Dilemma as PPPRA battles to stabilise petrol price amidst forex scarcity
Former NNPC GMDs decry attacks on pipelines
There is confusion in the Petroleum Products Pricing Regulatory Agency (PPPRA) over the maintenance of N145 per litre of premium motor spirit (PMS) , as anxiety is growing that the nation may no longer be able to keep the country wet with the product as the scarcity of foreign currency continues to threaten supply.
The Guardian gathered in Abuja that the PPPRA is yet to review the template it put in place on May 11, 2016, four months after as it should be reviewed every quarter (three months).
With the dollar moving well beyond the pegged N280, which marketers were told to bring in the product for and with the capacity of Nigerian National Petroleum Product (NNPC) over-stretched, the PPPRA appear to be at a loss on how to balance political exigencies and the market fundamentals.
As at Monday, crude oil was sold at $42.04 according to the current price of the Organisation of the Petroleum Exporting Countries (OPEC), while gasoline went for $3.60 Cents. The breakdown shows that a litre of petrol is now sold for 90 Cents in most states in the United States as at Monday.
The Guardian learnt that while the official exchange rate of dollar has gone up to N310 from the N280 that was the case in May when the existing PPPRA template was released, the Naira now exchanges for N405 at the parallel market. This, The Guardian, learnt has put marketers in a tough situation, as they are unable to get foreign currency at the official rate to import the product. Not only that, it was gathered that banks are no longer interested in extending letters of credit (LCs) to the importers as recouping their money has been problematic.
Accordingly, if the current price of petrol at the international market is anything to go by, the product should be sold at about N270 if marketers are able to access foreign currency at the official rate of N305 to the dollar. It is only under this circumstance that the marketers can break even.An official, who spoke on the condition of anonymity told The Guardian in Abuja, said the PPPRA is not planning to jerk up the price of petrol under the present situation.
He said: “Yes, the sector is going through a tough time now but there is no move by the Agency to increase the pump price. The Agency has not received any nod from the Federal Government to increase the price.”Reacting to the development, an industry source blamed the adoption of price modulation instead of outright deregulation for the present predicament the nation finds itself.
His explanation: “We got it wrong as government opted for what it described as ‘price modulation’ instead of deregulation. Deregulating the sector would mean price adjusting itself to the reigning realities. The price would have been responding to the dynamics of the market by adding little figure at a time. But now, the country does not have foreign currency to import, failed to repair its refineries, receives less money as a result of the activities of militants in the Niger Delta and Nigerians would not want to hear anything about price increase, where would the government go from here?”
In the mean time, forum of former Group Managing Directors (GMDs) of the NNPC has decried sustained attacks on the assets of the Corporation.
Rising from its meeting in Abuja at the weekend, the forum itemised security as the main threat to the survival of the sector.
The forum said: “Insecurity is threatening production and damaging the Niger Delta environment. There is the urgent need for government and security agencies to refocus as well as engage the various host communities as well as established social and traditional structures to develop an actionable partnership framework toward finding a lasting solution to the present unrest.”
The former GMDs also expressed concerned over the increasing negative perception of the Corporation by Nigerians especially in terms of opaqueness and accountability. They therefore called on the Corporation to educate Nigerians on NNPC activities as a commercial entity managing the nation’s assets in trust.
The former GMDs advised the management of the NNPC to rely on the the Original Equipment Manufacturers (OEMs) for the rehabilitation of the comatose refineries, which should also be restructured to operate as an Incorporated Joint venture (IJV) similar to the Nigerian Liquefied Natural Gas (NLNG) model with credible partners having requisite technical and financial capabilities.
The forum commended NNPC for resolving the lingering fuel supply crisis and urged the Corporation to emplace measures that will ensure sustenance of seamless supply of petroleum products nationwide.However, the forum was quick to observe that the PMS price cap of N145/litre is not congruent with the liberalization policy especially with the Foreign Exchange rate and other price determining components such as crude cost, Nigerian Ports Authority (NPA) charges etc remaining uncapped.
The former GMDs advised that funding of JV Operations should be the first line charge to oil revenue to ensure sustainable production and reserve growth.
The former NNPC chiefs also endorsed President Muhammadu Buhari commitment for sustaining exploration activities in the frontier basins particularly the ongoing efforts in Chad Basin and the Benue Trough. They therefore advised the GMD to pay priority attention to the Chad Basin where promising prospects are recorded.
The former GMDs noted that for effective functioning of any National Oil company (NOC), the technical components of the country’s Exploration & Production (E & P) must be integrated as part of the country’s NOC. They therefore posited that NAPIMS being the technical component of Nigeria’s E & P, and not just an investment vehicle, must remain with and managed by NNPC.
The forum noted further: “The current Petroleum Industry Bill (PIB) which proposed the incorporation of NAPIMS and taking it out of the NNPC will inhibit the effective functioning of the NNPC as a National Oil Company (NOC). This will make NNPC to operate at a different level compared to its peers in other OPEC Member Countries. While the former GMDs have no issues with incorporation, they strongly advise against taking NAPIMS out of NNPC.
The former GMDs expressed serious concerns about the continued dwindling of NNPC revenue and advised the Corporation to pay particular attention to its revenue-generating entities such as the Nigerian Petroleum Development Company (NPDC), Retail and the Refineries to return the Corporation to high performance, growth and profitability.
The former GMDs were worried about the level of NNPC’s debt profile, and advised that as a matter of urgency, NNPC should establish the true state of its current financial status and immediately decide on the most appropriate capitalisation model.The forum also reviewed the state of NNPC Pensions. They advised that NNPC should explore avenues to close the pension funding gap including the restructuring of the current model.
Those who attended the forum included the Minister of State for Petroleum, Dr Ine Kachikwu, who was represend by the Senior Technical Assistant, Engr. Johnson Awoyomi, Dr. Edmund Daukoru, Odoliyi Lolomari, Dr. Thomas M. A. John, Engr. Lawrence Amu, Dr. Jackson E. Gaius-Obaseki, Engr. Funsho Moses Kupolokun, Engr. (Dr.) Abubakar Lawal Yar’Adua Dr. Joseph Thlama Dawha and the current GMD, Dr. Maikanti Baru.