FG settles N600b oil marketers’ debt, expects fuel price to fall
31 Aug 2017
The Federal Government of Nigeria said it had settled N600 billion owed to marketers of Premium Motor Spirit (PMS) by the previous administration, a feat that had led to the stability in fuel supply system for over a year.
Nigeria’s Minister of State for Petroleum Resources, Dr. Ibe Kachikwu in a podcast released on Thursday forecast on his scorecard on his two years in office also projected a crash in fuel price in the coming years in view of stability and completion in the sector.
According to him, “ a look at the prices of the diesel which are now 40% down and recording surplus supply is enough evidence that the petrol prices will also crash.”
He believed that once Nigerians throw their trading skill it, once competition thrives, the prices will continue to tumble.
He said, "My guess is that you will see the prices tumble in the next four, five to six months. The market will be more stable and definitely the prices will be lower than what we see today."
On the progress made in the petroleum downstream sector, he said that “in the last 10 years, this is the first time that the three refineries are working simultaneously, although at 50 % of their capacity.
"We expect to put in investment to put them to 90% capacity."
Moreover, Kachikwu said that it was also the first that the NNPC group of companies were recording savings which could be used to address the issue of the refineries alongside the Joint Venture Partners.
“It is the first time the government is upgrading the depots to extent that of the 19 only three are not functioning at the moment.
“This is the first time that a government is considering the replacement of the 35 year old pipelines.
“It has been one massive problem after the other in order for the sector to stabilize in term of product supply in the country.”
Kachikwu however submitted that but "the time has come to take on the problem bullishly and that is what we are trying to do. So, we believe the ire will be money for infrastructural development in the downstream sector.
"We believe that a lot of the companies will jump up now and be able to sell at the right prices and not the pump down by the problem of price control and will be able to grow their businesses. We believe that most of them efficient ones will drive prices southward rather than northward.
"And we believe that almost 200,000 jobs will be created in this sector and over 400,000 jobs will be saved which would have been lost if we had continued on the path we were in."
"Now, why do we have to do this? The first one is that when we came into position in August last two years about N600 billion was owed to marketers. And all of them basically ceased importing products.”
He explained how he lifted Nigerians from the pains of scarcity of the Premium Motor Spirit and its concomitants queues.
He noted that the product was scarce because its selling price was higher than its cost price, hence the removal of the Petrol Support Fund (PSF) also known as petrol subsidy.
He said: "want to spend time to talk to you about the recent things we have done in term of sale of PMS. I know that a lot of you watch as we move price from N86.50 to N145 were screaming where were we heading ?"
According to him, there would have been no better time to accomplish the feat other than in the administration of President Muhammadu Buhari, who was trusted enough to utilize the benefits from PMS for the betterment of the country.
This according to him, upon the removal of the subsidy, the marketers were reluctant to import the product owing to their lack of access to forex.
He said the Federal Government had no money from crude oil following the reduction in production as the militants were on rampage .
The minister said that "The reality was that we did have the barrel to throw at it, we didn't have the refineries . The Federal Government was bleeding. The production today is about 1.4 because the militants attack had taken away about 800,000 barrels per day. Once you do not have the barrel, foreign exchange does not come in.
"So foreign exchange was depleting and the question was what did we do with the foreign exchange we had.
"And the President made the right choice to leave what we have intact so that we do not run into a state of bankruptcy. The only option we had was to create a liberalized environment so that people can bring in their products, source their money from secondary markets, charge the right price which they would not do unless the price was high. Fellow Nigerians, we were left with no option than what we did."
According to him, the refineries were not working but as soon as government was able to revamp them 445,000 barrel per day was sent to the refineries
He noted that the situation culminated in almost making the Nigerian National Petroleum Corporation (NNPC) the sole importer of the PMS instead of its statutory provision of 55%.