After initial hesitations to appear before the Senate Committee on Appropriation which drew the rage of members, Mele Kyari, Group Managing Director of NNPCL, last Wednesday finally showed up before the August body, but got even more controversial as he made claims that have since continued to unsettle the downstream sector of the Oil Industry.
While explaining the contentious issue of fuel importation, Kyari claimed that other oil companies boycotted fuel importation because of their inability to manage the fluctuations in the foreign exchange market and the responsibility that the Petroleum Industry Act imposes on sector players.
Downplaying the vexacious issue of the continuous decline in the value of the Naira and emerging wide gap between the official and parallel market rates, the GCEO of NNPCL said: ” There is always a parallel market in every country. There is also an import and export window in every country, even in the developed world. But there is always a narrow gap between the two and it takes time for you to have stability in this gap so that you have a low margin between the two for a sustained period, then business will thrive.”
Then he predicted: “I am very confident that by the end of the first quarter of next year, those margins will narrow and stability will come and you will see others coming into the importation market. “
Downstream Sector watchers however are taken aback by the pronouncements of the NNPCL boss before the Appropriation Committee, with many of them submitting that Kyari, either deliberately or inadvertently, not only ignored the main plank on which the fuel subsidy removal and the deregulation policy is laid, but also unfairly treated, if not ridiculed, the wholesale fuel suppliers who had been forced to suspend fuel importation owing to circumstances beyond their control.
“The idea behind subsidy withdrawal is to put an end to the monopoly of NNPCL in respect of fuel importation. There ought to be a level playing field on which all players are supposed to operate on. How do you then blame wholesale fuel importers who enthusiastically secured licences to bring in products only to discover that the authorities cannot make the forex needed available to them at official rate . “And going to the parallel market is equivalent to a suicide mission, ” an Investment analyst noted.
He said further: “To admit that oil importers have left the business of fuel importation to NNPCL as Kyari admitted before the Committee is to admit the failure of the fuel subsidy withdrawal and deregulation policy and that is invariably saying that there is no end in sight for the sufferingmasses of Nigeria because it is only a level playing field for all fuel importers that will bring about a healthy competition which in turn will gradually bring down the cost of petroleum products.”
The contention is that rather than gloat over wholesale suppliers’ inability to import and portray them in negative light, it should call for sober reflection on the twin policy of fuel subsidy withdrawal and the unification of foreign exchange.
Experts say the development should challenge the officialdom which Kyari represents that today not a single wholesale supplier is involved in importation business, even though as many as 94 of them were issued permits to import products when the policy took off seven months ago.
Over the years, access to forex has been the main albatross to smooth fuel import into the country by the oil marketers, consequently putting in dismal straits every attempt to break the stranglehold of NNPC on the market and ensuring that every attempt at deregulating the sector came to grief.
At the current selling price of between N595 and N610 per litre in Lagos and between N610 to N620 elsewhere, the contention is that NNPC Limited is not coming clean to Nigerians on the realities of the fuel market with regard to pricing and product supply. Yet, the value of the naira has been steadily sliding downwards, reaching an abysmal low on the parallel market with one dollar exchanging for N1200, a wide shot from the official exchange rate of N850 to a dollar.
Recall that between 2010 and 2016, the Depot and Petroleum Products Marketers Association (DAPPMAN) and Major Oil Marketers Association of Nigeria, MOMAN relied on federal government’s promise and resorted to massive fuel importation only to get their fingers burnt as the Federal Government failed to honour its own side of the bargain. At a point, their unpaid subsidy claims and matured Letters of Credit (LCs) arising from the old subsidy regime rose to $2 billion. Of this amount, only 20 marketers were paid
N69 billion after the National Assembly’s intervention three years later. Some of them are still owing to date.
Market watchers contend that the President Bola Ahmed Tinubu government, having demonstrated enough courage by ending the fuel subsidy regime should walk the talk by ensuring that oil marketers are not put in another grim business adventure again as this will spell doom for the new policy and indeed the economy.
Experts reasoned that allowing NNPC to continue as sole importer of fuel into the country has not only returned the country to subsidy regime, but made trivial the audacious conviction and move by the President to end the subsidy regime while also impacting negatively on the economy.
Experts however, warned that returning fuel subsidy at this time will lead to policy somersaults which could have very grave implications for the economy. It is for this reason that they urge the government to spare no efforts in ensuring that the right incentives are put in place to bring the oil marketers fully back into business and ensure keen competition among all players including NNPC Limited.