FG to announce bids for 3 modular refineries in coming weeks

The federal government will in coming weeks announce the bids to set up three modular refineries expected to add up to 650,000 litres per day of Petroleum Motor Spirit (PMS) to local production and boost huge supply deficiencies.

Garba Deen Muhammad, Group General Manger, Public Affairs of the Nigerian National Petroleum (NNPC) told BusinesDay that those bids are already being evaluated and will be announced soon, with expectations that they would begin to ramp up local production by 2018.

“As we speak, bids are being opened and are being evaluated for modular (smaller) refineries which will be collocated within the existing bigger refineries so that they can use existing facilities.

We expect that by the end of 2018, we will become a net exporter of PMS,” he explained.

Meanwhile, the federal government has been appealing to citizens for understanding on the hike in fuel prices.

Addressing editors on the matter yesterday in Abuja, Muhammed explained that the central reason for the increase or the latest policy was due to unavailability of foreign exchange to finance the importation of PMS, a burden which the NNPC has carried in the last two months.

He said the new policy was designed as a long term solution and that market forces and competition will take control of the situation in due time.

Lai Mohammed, minister of information who equally spoke at the press meeting debunked claims that reason for the new price regime was due to porous borders that encouraged smuggling.

He said rather, that the new prices will discourage smuggling and also make it less attractive for hoarding because according to him, “once you have products everywhere, it will cost you more to keep your products.”

He equally debunked the notion that this new price regime amounts to subsidy removal. “No. There is no subsidy to remove because no provision was made for subsidy in the 2016 budget.

Last year, the government paid out N1trillion in subsidy, and that’s one sixth of this year’s budget. We can’t afford to pay another N1 trillion in subsidy.

 

The minister explained that the drastic fall in the price of crude oil – the nation’s main foreign exchange earner, there has also been a drastic reduction in the amount of foreign exchange available.

He explained that the unavailability of forex and inability to open letters of credit forced marketers to stop product importation and imposed over 90% supply on the NNPC since October 2015, in contrast to the past where NNPC supplies 48% of the national requirement.

His words, “The truth is that the NNPC does not have the resources for, nor is it designed to meet this increase in supply. The result is the crippling fuel situation across the country. Pushed to supply 90% of the products required for domestic consumption, the NNPC has continued to utilize crude oil volumes outside the 445,000 barrels/day allocated to it, thereby creating major funding and remittance gaps into the Federation account.

The minister noted that erstwhile PMS price of N86.50 gives an estimate subsidy claim of N13.7 per litre which translates to N16.4 billion monthly.

“There is neither funding nor appropriation to cover this,” he explained.

He equally hinted that the renewed insurgency and pipeline vandalism in the Niger Delta have drastically reduced national crude oil production to 1.65 million barrels per day, against 2.2 million barrels per day planned in the 2016 budget, further reducing income to federation account and also affecting crude volumes for PMS conversion and impacting Federal Government’s forex earnings.

The resultant fuel scarcity has created an abnormal increase in price, he said, resulting in Nigerians paying between N150 and N300 per litre as prevalent hoarding, smuggling and diversion of products have reduced volumes made available to citizens

He said in the absence of available forex lines or crude volumes to continue massive importation of PMS, it is clear that unless immediate action is taken to liberalize the petroleum supply and distribution, the queues will persist, diversion will worsen and the current prices will spiral out of control.

But he assured that under the new price regime, the PPPRA and DPR will be further empowered to ensure a level playing ground and strict compliance with market rules by all stakeholders and consumer protection.

And according to him, the new price regime will ensure product availability across the country; reduce hoarding, smuggling and diversion of products substantially and stabilizes price.

The minister was also optimistic that the new price regime would ensure market stability and improve fuel supply situation through private sector participation and also create labour market stability. “This will potentially create additional 200,000 jobs through new investments in refineries and retails and prevents potential loss of 400,000 jobs in existing investments

He said meanwhile that the N500,000 billion set aside in the 2016 budget for social intervention will serve as palliatives and hopefully and lift millions more out of poverty.