Fuel price may go up Jan 1 2017 as Sale of Petrol at N145 is No Longer Sustainable-NNPC

After months of struggling to sustain fuel imports under the current foreign exchange regime, the Nigerian National Petroleum Corporation (NNPC) finally admitted monday that the sale of petrol at the current market price of N145 per litre was unsustainable due to the prevailing exchange rate. NNPC also admitted that despite the preferential exchange rate made available to oil marketers to import petrol, many were reluctant to do so because they would be selling at a loss at the prevalent pump price, implying that NNPC that continues to import it was subsidising petrol. This came as the House of Representatives pledged to review the laws on licensing, regulation and incentives on petroleum refineries in the country. Speaking monday in Lagos at the 2016 Oil Trading and Logistics (OTL) Conference, the Group General Manager, Crude Oil Marketing Division at the NNPC, Mr. Mele Kyari, said there was no way petrol would continue to be sold at the current pump price. Kyari was however quick to add that the present administration would not announce another increase in the petrol pump price, because Nigerians would not accept it. According to him, legislation by the National Assembly would be required for petrol to be sold above N145 per litre. He said some suppliers had already stopped importation because of the current pricing regime. “We have a very difficult business environment. It is impossible today to import products at the current market price – at the curren foreign exchange rate. There is no way today you can take the product to retail and sell at N145. It is not possible today. “If that is true and I believe that it is true because we all go to the market, why can’t we sell above N145? That is where legislation should come in,” Kyari said. “I also know today that it is impossible for this government to announce tomorrow that petrol is about N150. This government cannot do it. That is the truth. The people will not take that number. That is why suppliers are not importing,” he added. Kyari further argued that the scarcity of FX was not responsible for suppliers’ inability to import, adding that the NNPC had created “a niche FX market” for them. “It is not FX. We have created a niche market for FX. I am part of the committee that allocates FX to marketers. But it is rejected, and the reason being given is that the FX is not enough to import. But that is not the truth,” he said. According to Kyari, suppliers were refusing to import because they would be selling at a loss as long as the pump price is left at N145 per litre. “The truth is that marketers go back to the international market and land the product here, that you are required to sell it at N145 maximum. I am sure they won’t make it. That is the main reason why people are not importing today. It is not FX,” Kyari explained. He insisted that no marketer would import the product and make a profit if he sells at N145, stressing that marketers who currently sell below the N145 pump price do not import the product. “Today, are we in a subsidy regime, absolutely. There is no way you can bring products today and take it and sell at N145 and get back your money, and make a profit. That is not possible. “You can see some marketers saying that fuel is N138. It is because they did not import it. But someone has taken the heat; indeed, we (NNPC) have taken the heat, and you buy from us, so you can afford to go to the market and then put a ridiculous price. It is possible, because they did not import it. “So the issue is not FX scarcity. As I speak to you, there is stranded FX that nobody is ready to pick. We have closed the chapter on FX,” Kyari explained. Also speaking, the Speaker of the House, Hon. Yakubu Dogara, represented by the Chairman of the House Committee on Petroleum (Downstream), Hon. Joseph Akinlaja, stated that an amendment bill on the regulation and licensing of refineries had passed second reading in the lower chamber of the National Assembly. According to him, the bill, when passed into law, will mitigate the bureaucracies and bottlenecks associated with the refining of petroleum products and also provide incentives to refinery operators. “We are committed to reviewing and improving legislations, especially with regard to refining, gas, petrochemicals and a host of other key areas in the downstream sector operations in Nigeria,” Dogara added. Chinese Investors Arrive Today Meanwhile, 10 Chinese investors are expected to arrive Abuja today to hold discussions on the $5.5 billion investments in the oil and gas sector, THISDAY has learnt. The delegation will comprise officials of China North Industries Corporation (NORINCO) and Tiger Jade, the investment arm of NORINCO. Their visit, it was learnt, is a follow-up to the roadshow embarked upon by the Minister of State for Petroleum, Dr. Ibe Kachikwu, in China