Payment of subsidy on petrol would have sent the country into bankruptcy,
Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), Mele Kyari, gave the indication yesterday.
He spoke the day after releasing the new petrol pricing template, which raised the price from N185 per litre to between N488 – N577.
In his inauguration address, President Bola Ahmed Tinubu announced that ‘fuel subsidy is gone’.
Following this, many marketers shut filling stations while others sold for between N600 and 900 per litre. Petrol queues returned to cities.
On Wednesday, a Federal Government team met with Labour leaders on the issues and palliatives. The parley will resume on Sunday in Abuja.
Kyari, who spoke during a visit to the National Secretariat of the All Progressives Congress (APC), said the Federal Government spends N400 billion on subsidy monthly, an amount that is too heavy for the economy to cope with.
He added that no kobo has been made available by the government for subsidy payments since February.
The NNPCL chief also said there is no data on the volume of petrol consumed in the country but that of offloading from the depots is always available.
He advised Nigerians to accept the reality that subsidy removal had come to stay.
The NNPCL boss warned that reversal of the decision could cause a cash crunch for the company and consequently affect borrowings by the federal and state governments.
Last year, the Federal Government said payment of subsidy would stop by June 2023. It budgeted N3.36 trillion for the payments.
Admitting that the removal of subsidy would cause hardship for the masses, Kyari expressed optimism that the attendant high cost of living would fizzle out in due course.
“This is exactly where we are today. So, we no longer can bear it because of liquidity. If we continue we will run into defaults and the defaults of NNPCL are the default of Nigeria.
“Once NNPCL goes into defaults and liquidity, it affects every borrowing done by the country. Even the sub-nationals. Your lenders will come back to you and say your country can no longer pay.
“The only way you can stop this is to stop this conversation around subsidy as done by Mr President (Bola Tinubu) on May 29.
“We saw that within 24 hours after the announcement, the bond market appreciated. It is nothing else other than the statement around subsidy and balancing of the apex market.
“These two elements are major concerns of every investor all over the world. Every partner that we have is worried about what is your apex regime and how you deal with your subsidy. They know that this subsidy constitutes a huge amount of money and this country may not be able to survive and pay its debts.
“It is very clear that everybody understands this. Before today, the average subsidy level was N400 billion every month.
“There is this common argument that the masses will suffer; that we are going to have problems with them. I agree. Once you increase prices to this proportion, as it has happened, it will have an impact on inflation. There is no doubt about it. The market determines what happens next.
“There was a provision of N6.3 trillion in 2022 and N3.7 trillion in 2023 for up to half a year, but I can tell you that not a single naira of that has been funded and what did we do because by law, we are obligated to pay taxes and royalties and other obligations but we held back the fiscal obligations of our shareholders because there was nothing to do.
“The burden of subsidy must be financed because the provision in the law simply means that the government will write a cheque to NNPCL at the end of the month for the service that we’re providing to the nation. That cheque has not been written at all.
“Absolutely, there is a provision in the budget but you do not have the cash to back it up or you also don’t have the fiscal obligation that should have come for the NNPCL to settle for this and this definitely means that there is provision for the end of June, according to the Appropriation Act.
“We still have a net balance of over N2.8 trillion that the federation should have given back to the NNPCL.
“For any company, when you have negative N2.8 trillion, there is no company in the whole of Africa that will lend to you. You cannot have receivables. The provision of subsidy is there but there is no funding for it. It means it is only on paper. So, it doesn’t exist.
“The conversation today is not really about when you take off subsidy, you can do roads, build hospitals, education and etcetera. It is very true. You cannot give what you don’t have. The key issue is the country does not have the money to back subsidy.
“The inflation in very many countries, it goes up when you have the economic indexes becoming difficult. In many countries, there are very many factors that can make inflation go up. When it does, prices go up. We have to deal with it; live with it.
“You have to increase your production, consumption and balance. You have to change the conversation around GDP (Gross Domestic Product) growth and so on. Mr President’s target is to have a seven per cent growth of GDP. You cannot have this if you have this distortion in your demands and consumption pattern.”
Pointing out that the elite is the main beneficiaries of subsidy, Kyari said that 38 per cent of fuel supply goes to the Federal Capital Territory(FCT), Lagos, Port Harcourt and Kano.
He said: “Very many of us here have at least two cars in our houses. When you buy 100 litres of fuel, the government is subsiding every three litres with N100.
Read Also: Fuel subsidy not budgeted for in 2023 budget – NNPC
“Even consumption itself is skewed in locations and states where the level of economic activities are higher than the others. It is very understandable and that is why people can afford it in Abuja, Lagos, Port Harcourt and Kano.
“So, over 38 per cent of the total fuel distributed in this country ends up in these places. All the other parts of the country suffer.”
Addressing reporters after the meeting, Kyari said that rehabilitation of the nation’s refineries was progressing.
“There is an ongoing process of rehabilitation. One of them will come this year, the second one will come on stream next year and then the third one will follow thereafter,” he said.
APC National Chairman, Senator Abdullahi Adamu, had at the meeting thanked the NNPCL chief for updating the party’s leadership on the subsidy issue.
Adamu, who noted that the party was better informed, promised to give the government the much-needed support for the full implementation of the policy.
Speaking on a television programme last night, Kyari explained that with the removal of subsidy, the NNPCL would only supply 30 per cent of the nation’s requirement.
This, according to him, will leave room for anyone or company desirous of venturing into petrol importation to do so.
He said: “By law, there is competition and the NNPCL can only supply a maximum of 30 per cent of the commodity into the market. There will be no monopoly in the market.
“So the removal of subsidy means people can access FX (Forex) freely at the same level as NNPC. This is clearly a market-driven situation. The market-driven situation means that other players will come in.
“By the way, let me make this very clear, this is a very insignificant part of NNPC’s business.
“There is no benefit for us to monopolise except it is provided for by the law.”
Kyari cited an example with the supply of Automotive Gas Oil (AGO) diesel, which it supplies less than 30 per cent of the volume required by the country.
He pledged that once other marketers venture into petrol supply, NNPCL will reduce its volume to the market.
“We are already doing it. Today, the daily consumption of AGO (Automotive Gas Oil) or diesel is 12 million litres a day. Today, NNPCL brings less than 30 per cent of that volume to the market.”
He attributed the queues that greeted the removal of subsidy to panic and the fact that many depots did not operate for some days because of pricing.
The GCEO said although Dangote Refinery will become operational either in July or August, it may not immediately produce 100 per cent of Nigeria’s fuel needs.
He said: “I am not sure we will have all the volume we need immediately but that will happen when all the refinery is commissioned.
“It may be in July or August. Once that happens, we will have a significant volume of PMS.”
On another television programme, the NNPCL said the company had 41.8 billion litres of petrol that are enough to last 30 days.