Featured, Oil & Gas
Unfortunately, the real cost of the removal of subsidy on petrol on businesses and the wellbeing of Nigerians may after all dwarf the so called gains from the policy. Perhaps, in the midst of all the current quagmire, Nigerians may have accepted that the era of cheap, affordable petrol is gone.
By Goddy Ikeh
DESPITE the agitations against the hike in petrol prices and the fact that the high price of the commodity is one of the drivers of inflation in the country, some oil industry experts and stakeholders have not failed to warn Nigerians that the coming onstream of the nation’s four ailing refineries will not guarantee nor translate to low petrol prices.
The latest group to join the train is the Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, which has announced that the Port Harcourt Refinery won’t reduce the price of petrol.
Speaking at the association’s National Executive Council meeting in Abuja, the National President of PENGASSAN, Festus Osifo, confirmed that the 60,000 barrels per day Port Harcourt Refinery, was functioning and currently producing various refined petroleum products, including diesel, kerosene, and petrol.
Osifo, however said that the resumption of operations at the refinery would not bring about the reduction in prices of petrol and other petroleum products. He also said that the feedback from PENGASSAN members who work at the refinery has confirmed that the facility is operational, but requires additional maintenance to be completed.
According to Osifo, the operation of the refinery will not reduce petrol prices, emphasizing that the current value of the naira against the dollar is a major factor in determining the price of refined products.
“The processes are not really much of our concern, as they don’t affect the man on the street. But what people want to know is if we are getting petrol from the refinery and the answer is yes. We are still pushing that the new one comes onstream and then the Warri, Port Harcourt refinery begin operation.
“The operation of these refineries will create jobs and boost the economy, but overall, will it bring down the cost of PMS (petrol), AGO (diesel), and DPK (kerosene)? The answer is no. The reason is because of the weakness of our currency.
“So, the greatest challenge is the weakness of our naira, and we have advocated this over and over again. With the naira exchanging at 1 dollar to N1,700, the cost of goods in the market is going to be high. So what has made those costs high today is our exchange rate,” local media reports quoted Osifo as saying.
Unfortunately, the position of Osifo and PENGASSAN on this issue of high prices of petrol will not go down well with millions of Nigerians who are groaning over the current hardship in the country and that explained why the joy that greeted the resumption of operations of the Port Harcourt Refining Company was short lived when the news filtered in that the refinery was selling petrol far higher than what the Dangote Refinery was selling.
One of the stakeholders, who raised the alarm was Joseph Obele, PETROAN’s public relations officer. He disclosed that the petrol supplied by the Port Harcourt Refinery costs N75 per litre more than that from the Dangote Refinery.
Although Obele applauded the federal government for restoring the 60,000 b/d refinery, but highlighted the impact of the price gap on marketers and consumers.
He noted that while Dangote Refinery sells petrol to marketers at N970 per litre, the NNPCL’s price stands at N1,045, a difference of N75 per litre.
According to local media reports, Obele explained that the differential was a significant challenge for marketers, particularly in an industry that relies heavily on competitive pricing for profitability. He also said that N75 price differential was a steep margin for businesses.
Obele was not alone as some other Nigerians frowned at the persistent high cost of petrol in the country despite having two functional refineries – Dangote and Port Harcourt refineries.
Speaking to Daily Post newspaper recently, Hassan Alowonle noted that for many years, Nigerians largely enjoyed democracy and good governance until the current administration of President Bola Tinubu removed the subsidy on petrol.
“The price of fuel has always been friendly even during the tenure of former President of Nigeria, Goodluck Jonathan. During his time, there was a mass protest over the hike in fuel price, but many Nigerians can’t compare the administration with the current government of President Bola Tinubu.
“When no refinery was working in the country, the government ensured it subsidized the price of petrol, giving Nigerians the opportunity to buy petrol at a cheaper price. Even when the immediate former President of the country, Muhammadu Buhari handed the baton to Bola Tinubu, the price of petrol was N210 pet litre.
“However, when Nigeria now has functional refineries both in Lagos and Port Harcourt, the price of fuel is sold at the rate of N1,040 per litre. It is obvious that the current administration is generating revenue at all costs.
“The price of the petrol will keep increasing even if the country has 10 functional refineries unless the government considers the masses and breaks its total dependency on revenues from crude oil,” he said.
Reacting to the high price of petrol Sylvester Agih said: “With respect to the hike in petrol price despite the existence of two refineries in the country, one side of the argument is that with the removal of subsidy, what Nigerians are paying is the actual cost of the product.
“The other side of the argument is that since we have our own functioning refineries, Nigerians ought not to be paying as much as N1000 for a liter of fuel, especially as costs of importation, including import duties no longer apply.
“There may be other perspectives on the issue but the fact is that it negates common sense that Nigerians who have been paying less when the country was importing fuel are now constrained to pay more even with two functioning refineries.
“Sadly, the government cannot point to any project it has executed with the funds saved from the removal of the fuel subsidy.
“Similarly, the government cannot, in sincerity, claim that the life of the ordinary citizen has improved following the removal of the fuel subsidy.
“This is why I don’t blame many who have accused the government of corruption and have called for the reversal of the removal of fuel subsidy,” he told the Daily Post.
In his reaction, Ameh Anthony expressed his disappointment over what he called suffering in the midst of abundant resources, saying the hardship Nigerians are going through resulting from high cost of petrol is uncalled for.
“Imagine, we have two refineries that are functioning. In other words, petrol is supposed to be very cheap for us, but the reverse is the case.
“We are even suffering more than when we imported petrol. Who did this to us?,” he asked.
According to him, the surge in fuel price does not affect not just individuals, but also businesses, which has led to increased costs of goods and services, worsening economic hardship on the ordinary Nigerians.
Another respondent, Daniel Mustapha, called for a probe into the reason behind the development.
According to him, encouraging the government and refinery operators to improve efficiency, reduce waste, and increase production to meet local demand are the solutions to put an end to the era of continuous hike in petrol prices.
“These things need to be investigated and appropriate action taken, otherwise, the hike in price would continue unabated and by extension increasing hardship in the country.
“Once the price of fuel is high, it affects every facet of the economy, including those that sell vegetables.
“Our government should be interested in exploring solutions to reduce petrol costs, such as increasing refinery production, improving efficiency, or implementing price control mechanisms.
“The government and refinery operators should provide clear explanations for the high petrol costs and permanently end these things that are suffocating ordinary Nigerians,” he stated.
However, responding to the various reactions to the high price of petrol, the Chief Corporate Communications Officer of the NNPCL, Olufemi Soneye, echoed the position of PENGASSAN, saying that the NNPCL was under severe financial pressure, which posed a threat to the sustainability of fuel supply, and that the price increase resulted from financial difficulties, including high debts to petrol suppliers.
According to him, the most recent increase followed NNPCL’s decision to step back from its role as a middleman between marketers and the Dangote Refinery.
This opened the market to direct dealings between the refinery and marketers. Consequently, NNPCL and other fuel stations adjusted their pump prices to align with refinery costs, leading to a 15% increase to N1,030 per litre.
However, Nigerians have lost count of the number of times petrol prices have been adjusted since the commencement of operations of the two refineries. And this has further confirmed the position of the Chief Corporate Communications Officer for the Nigerian National Petroleum Company Limited, NNPCL, Olufemi Soneye, when he stated that the refinery’s operations alone do not guarantee lower fuel prices.
According to Soneye, global market forces determine the pricing of petroleum products from any refinery, including the Dangote Refinery.
Meanwhile, the NNPCL has equally announced that the status of the second Port Harcourt Refinery with capacity of 150,000 per stream day, bpsd, and bringing the refinery’s combined crude processing capacity to 210,000 bpsd.
The Group Chief Executive Officer of the NNPCL, Mele Kyari, told the Nigeria Labour Congress, NLC, and the Trade Union Congress, TUC, labour leaders, who recently visited the facility in Port Harcourt.
Kyari, who was represented by NNPC’s Executive Vice-President, Downstream, Isiyaku Abudulai, said that the new Port Harcourt refinery was under rehabilitation and would be updated soon.
He said: “When the rehabilitation is completed, it will be up and running and it is the state of art compared to any refinery around the world. So, there will be compliance to health and safety compliance, HSC.
“All the assurances of compliance will be made. And that is why a total rehabilitation is being made. From the contractor’s view, Tecnimont SPA, and from the reports they send us, they are up to over 90 per cent completed and we will deal with that as soon as possible.
“We are following up too to ensure that we get value and that we have a combined 60,000 bpsd and 150,000 bpsd to get 210,000 bpsd, so that will support our refining processes, our products, and with the multiple effects that we have on our refining products, finished products, that we desire in this country.”
Kyari said once the feat is achieved, the refinery can propel sufficiency, exports and imports and local consumption of petroleum products, especially petrol.
Speaking further, he said the NNPCL has ensured that there is an established and professional technical operations and maintenance, O&M, team that would continue to operate and maintain the facilities.
Kyari said: “And that also involves looking at the processes and the assets, replacing those aging items that need to be changed and ensuring that the refinery is up and doing.
“I think that’s the fundamental, and as I said, we are looking at the best O&M teams around the world to support that process.”
He also said that the company would scale up monitoring to ensure that “we comply with the best practices around the refinery across the world.”
However, the latest update on the second Port Harcourt Refinery by the NNPCL did not attract much attention and controversy that heralded the coming onstream of the first Port Harcourt Refinery when the people have realised that the coming onstream of the refinery would not affect their wellbeing significantly.
Reacting in the same vein to these developments, the President of the Lagos Chamber of Commerce and Industry, LCCI, Gabriel Idahosa, expressed fear over the continued survival of businesses, saying that rising about 450 per cent hike in prices of fuel since President Bola Tinubu assumed office is a major threat.
In his reaction, Bismarck Rewane, Managing Director of Financial Derivatives Company Ltd, said that some of these reforms of the federal government, including the high prices of petrol, have impacted negatively on Nigerians. Rewane told Channels Television recently that these developments have further deepened the trust deficit between the government and the people.
According to him, the people hear the government, but they do not believe the government. He, however, stated that high prices of products and the harsh economy still persist and that people are still groaning in the country. For Rewane, reforms without changes in institutions like the NNPCL will not yield any meaningful results, especially in the oil sector.
A.I
Dec. 17, 2024
Tags: Festus Osifo Joseph Obele PENGASSAN
