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As FG disowns reports of fuel price hike, TheScoop deconstructs Kachikwu’s actual remarks

Politics

As FG disowns reports of fuel price hike, TheScoop deconstructs Kachikwu’s actual remarks

Several newspapers have been reporting that the FG will increase the price of fuel to about N180 per liter but the Petroleum Ministry says the reports are not true.

The reports ride on the comments made by the Minister of State for Petroleum, Ibe Kachikwu at a National Assembly Joint Committee on Petroleum (Downstream) hearing.

According to Kachikwu, the current N145 pump price cannot be sustained as a result of the increase in the landing cost of fuel from N133.28 per litre in 2016 to N171 due to increase in crude oil prices.

A statement issued by Ministry’s spokesperson, Idang Alibi, read: “The Ministry of Petroleum Resources would like to categorically state that the Honourable Minister never mentioned nor insinuated the need or plans by the Federal Government to increase the current pump price of Premium Motor Spirit (PMS).”

The ministry however did not categorically rule out an increase. It said a special committee which was setup at the instance of the presidency has been deliberating on the matter for  a couple of days.

“The final decisions and recommendations from the Committee would be passed on to the President and Commander-In-Chief for approval,” the statement said.

But what did the Petroleum Minister actually say at the  Senate hearing and what did he mean? We have deconstructed Kachikwu’s explanations at the senate hearing for you.

What he said

  • Kachikwu said the NNPC has become the sole importer of petroleum products as marketers cannot afford to import at a loss of N26 per litre – a cost which the government is currently bearing and leading to a daily loss of about N900 million daily.
  • He said the situation is not sustainable as the N145 price was fixed at the first quarter of 2016 and stated that the crude oil prices per barrel has since risen to $67 from $49 at the time.
  • He however said the government must find a solution so as “to ease supply gaps and ensure availability of the product at all times.”

Below are the issues, and Kachikwu’s proposed solutions:

Rise in International Oil Prices:

Rising prices in international market is affecting domestic prices. What the country needs is to have the refineries working. It’s a shame that after 40 years, Nigeria cannot produce its domestic consumption.

“It would take 18 months to address problems of scarcity, price stability and other issues relating to supply of petroleum products,” he said.

Infrastructure Gaps

There is huge infrastructure deficit in the system because the NNPC ought to be distributing products through their pipes but most of the pipes are damaged. This has necessitated the use of trucks to distribute the product across the country.

“Most importantly, fixing the refineries should be the lasting solution,” he explained, suggesting the idea of granting private entities the concession to manage the pipeline. “To discuss and address the issues,” he said, “we have to seek approval from the President.”

Kachikwu’s Three Alternative Solutions To Price Increase 

One: “The Central bank of Nigeria ( CBN) to allow the marketers access forex at the rate of N204 to a dollar as against the official rate of N305 to keep the pump price of fuel per litre at N145.”

PS: This would amount to yet another different forex rate and will be prone to abuse as is the case with all the other special rates.

Two: “To give room for modulated deregulation where NNPC would be allowed to continue selling at N145 per litre in all its mega stations across the country while the independent marketers should be allowed to sell at whatever price is profitable to them in all their outlets.”

PS: This could lead to massive queues at NNPC mega stations but at least vehicle owners would have a choice of getting PMS elsewhere unlike the situation during the Yuletide where it was difficult to find the product.

Three: “To look at the direction of blanket subsidy for all the importers in bridging the gap which would be like going back to a problem that had earlier been solved.”

PS: This would represent a full scale return to the fuel subsidy regime and all the attendant issues involved.

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