By Egena Sunday Ode
The federal government is owing the Nigerian National Petroleum Company Linmited (NNPCL) N2.8 trillion of cash flow from the fuel subsidy regime, its Group Chief Executive Officer (GCEO), Mele Kyari, disclosed on Tuesday.
Briefing newsmen after he met with President Bola Tinubu at the Presidential Villa, Abuja, Kyari while stressing that the federation can no longer pay NNPCL for the burden of subsidy that it was carrying, said it intends to recover from the market.
“Our position is we are a supplier of last resort to the federation, we are a commercial company, supplying to the federation during the subsidy regime. Now I’m also aware that government will act to bring succour and relief to our country people. I know this government is very sensitive and they will do this.
“So, there are engagements that are ongoing to bring into effect that component of it. So, NNPCL will not do anything because we are a commercial company. It will not come from NNPC. But I’m aware that government will do something around this. But the reality is that you cannot give what you don’t have. So, today the country doesn’t have the money to pay for subsidy.
He further explained that “there’s incremental value that will come from it. But it is not an issue of whether you can do it or not because today we can afford it and they are not able to pay our bill. That comes to how much is the federation owing NNPC now? Today, we are waiting for them to settle up to N2.8 trillion of NNPC cash flow from the subsidy regime. And we can continue to do this.”
On subsidy removal effective takes off date, Kyari explained: “First of all, the Petroleum Industry Act, said that six months after the enactment of the Petroleum Industry Act, Petroleum motor spirit will be priced at its commercial value. So there will be no subsidies six months after the enactment on the PIA. That means by February 17th, 2022, there should have been no subsidy on PMS.
“Now the National Assembly and Government, in its wisdom provided for soft city in 2022, despite the fact that the provision of the PIA said terminated by 17th of February.
“So, government can decide to spend its money anywhere it wants and it can bring succor and relief to its citizen. This is very typical. It happens all over the world. However, that provision in 2022 and also 2023 has not been funded by government.
“A greater part of it is supported by the cash flow from NNPC’s other businesses. And therefore, even though there is provision to the end of June, there is no financing even from the start. And therefore since you can’t pay, you cannot expect NNPC to continue to carry it. And this has been the position that the NNPC has taken and what the President simply say is obeying the law and also the realities that the federation can no longer pay NNPC for the burden of subsidy that we are carrying.”
On why fuel queues suddenly resurfaced after President Tinubu’s address, the NNPLC helmsman, said “All of us must have seen importance of what exactly this means. And typically consumers will rush the fuel station to fill their tanks. And that is why you’re seeing these queues. And also for marketers, they would like to see what exactly this means in the sense that, you know, so how are we going to sell the product if subsidy on PMs is removed and the combination of two is what you are seeing, the obvious dislocation of distribution. And we believe that this will go away very, very quickly as you’re aware also.
“So, the Petroleum Industry Act has made it very clear that price of petroleum must be priced at market. That means there must be commercial price for petroleum six months and that time, six months after bringing into law of the petroleum industry at that are central, the Petroleum Industry Bill now the law that is August, 2021.
“So, after that you do not have a request to any subsidy on Petroleum Motor Spirit. But however, our country also decided to provide for subsidy in the 2022 Appropriation Act and also half year in 2023.
“The combination of this is that while the Petroleum Industry Act was clear that petroleum should be priced, but it didn’t say that government cannot spend its money in any way it wants. And therefore we as a commercial company established under the Petroleum Act, we are doing this simply as business delivering value to a supplier of last resort by batch of the law, but at the cost to the federation. And that cost includes the cost of subsidy.
“This subsidy costs should have been money that will be given to the NNPC maybe on monthly basis or even on daily basis if necessary.
“However, since the provision of the N6 trillion in 2022 and the N3.7 trillion in 2023, we have not received no payment whatsoever from the federation. That means they’re unable to pay and will continues to support the subsidy from the cash flow of the NNPC. That is when we net off our fiscal obligations of taxes and royalty, there is still a balance that we’re funding from our cash flow and that has become very difficult and affecting our other operations.
“We’re not able to keep some of this cash to invest on our core businesses. And at the end result is that it can be a huge challenge for the company. And we have highlighted this severally to government that they must compensate NNPC, they must pay back NNPC for the money that we have spent on the subsidy.
“Fortunately also by virtue of the provisions of the law and also the, and the Appropriation Act 2023, it is no longer available for that funding and we are very convinced today that the country can no longer fund this subsidy bill and they will not be able to pay NNPC and therefore we are happy and pleased to hear Mr. President’s commitment to elimination of this subsidy because they can’t afford it anymore. And we will take necessary steps to ensure that we recover our costs from the market and also being mindful of the fact that, you know, a situation like this can lead to exploitation of, of customers.
“And we’re also working with the regulator who is here with me to see how we can cut any such excessive management of greed for, to say the least. And this will be contained by the virtue of provisions to law the, the authority or the Nigerian mainstream and downstream regulatory authority. And then the competition agency, they’ll play their part.
“We think this is a very, very commendable step taken by Mr. President to bring it to effect the provisions of the law.”
