The Nigerian government says contrary to speculations, it is not interested in the removal of subsidy on petroleum products, but rather a price modulation that will reduce its involvement in pricing starting 2016.
The Minister of State for Petroleum, Dr Ibe Kachikwu, briefed reporters of the government’s position on Thursday while Speaking at a town hall meeting in Abuja
97 Naira Per Litre Projection
Dr Kachikwu said a periodical review of the Petroleum Pricing Template and a flexible management of the pricing system would be considered.
He said the review would allow marketers to trade freely and reflect prevailing international price of crude.
According to him, the review will be the key focus in the first quarter of the coming year.
In his words, “One thing we are very committed to next year, is to reduce the level of Federal Government subsidy, if any, to the industry, so that the industry can grow on its own strength. We can do that without the mechanism of saying subsidy is being removed or whatever, but have a benchmark approach to setting prices.
“The report that fuel is going to sell for N97 was not correct. I did not say refined products will sell for N97. I said between a band of N87 and N97 per litre, we are going to be looking at prices. Today, the prices are largely close to N87, so there might be no need to change prices.
“By January 23 it may go up slightly; March it may go up slightly too; by April it may come down. It is all a dynamics of what the price of crude is. I have not put an exact figure. I and the Petroleum Products Pricing Regulatory Agency, PPPRA, will sit down and do those calculations to be able to announce what price PMS will sell for in January. We do not anticipate any major shift because of the price of crude today.”
The oil-rich nation is currently grappling with one of the worst fuel scarcity the nation has faced in recent time, with some service stations selling petrol higher than the 87 Naira official price.
Some service stations have been penalised by the regulatory agencies, but critics have said the agency lacked the manpower to effect adequate monitoring of the marketers activities.
The Federal Government stated, yesterday, that the country no longer has the resources to fund the oil and gas industry, and is therefore, considering and developing new models of financing the industry in the days ahead.
He said in January 2016 the final decision on the fate of the country’s refineries would likely be made
He added that the unbundling process would see the NNPC broken down into four key components, namely: the upstream company, downstream company, the midstream company, which is gas and power marketing, and the refining group holding company.
He further stated that one of the major restructuring efforts would be in making the headquarters operations cost effective, hence, about more than half of its 2,200 core headquarters staff would be whittled down, with a lot of the affected staff assigned to the subsidiaries to help make the units more efficient and profitable.
“This is because we have very strong subsidiaries; some of them have not even taken off. We want to put a lot of energy around units that can generate profit for us and hopefully, collectively, we are going to take the entire industry along that line,” he said.
In addition, Kachikwu stated that come January 2016, strategic decisions would be made in terms of what areas of the country’s refineries would be closed to allow for full re-kitting before reopening them for operations, while it would also be considering the best operating model for the refineries.
He said: “Ultimately, technical support, technical services, and technical joint venturing would also be models. We would be looking at and reviewing in terms of the refineries. The whole idea is find the funds, find the right skills that you need, support the skills that you have and try to give out, real-time, above 90 per cent consistent performance in refining.”
On the part of the NNPC financials, he said, “Most of the management accounts up to 2014 are fairly finished; we are now looking at external audits. Audits were last done in 2010. We have brought the management accounts up to current; the external audits are ongoing; the 2012 to 2014 audits we expect would be done by March next year, which would bring us likely current.
“And, hopefully, next year, we will also finish the 2015 audit which will bring us right where we should be. So by June or July, we should have, quite frankly, all the results that NNPC needs.”
Kachikwu further maintained that the focus of the Federal Government was to get the NNPC back to profitability to ensure the sustenance of the company, while it is also targeting an increase of Nigeria crude oil production to 2.4 million per day in 2016.