Energy Gas Oil

Kyari: Fuel smuggling won’t stop until Nigeria deals with arbitrage

Group Executive Officer of the Nigerian National Petroleum Company (NNPC) Limited, Mallam Mele Kyari, on Tuesday maintained that the massive smuggling of petrol outside Nigeria’s shores would not stop until the government dealt with the current arbitrage situation.
Arbitrage is the practice of taking advantage of a difference in prices in two or more markets, the profit being the difference between the market prices at which the product is sold.
Despite Nigeria’s efforts to curb the illegal trading of its subsidised petrol in some African countries, the menace has increased in recent times, meaning that the country basically pays for petrol subsidy for its neighbours.
Although the country has an idea of the volume of fuel evacuated from the depots daily, which has been estimated to be about 64 million litres, it cannot say for sure the actual quantity consumed by its citizens since a substantial amount is taken illegally to locations outside the country.
Speaking on Channels Television last night, Kyari stated that another contributory factor to the difference in petrol price between Nigeria and its neighbours was that those countries could not afford to import fuel from Europe the way Nigeria did. He said they were, therefore, desperate for products from Nigeria.
Kyari said the pump price of petrol would be N300, if the government were to remove subsidy today, stating that the NNPC pays about N170 per litre on the fuel consumed by Nigerians.
Ironically, THISDAY recalls that in the last few weeks many Nigerians have bought the product for as much as N600 per litre, which calls into question the continued subsidy that essentially creates an avenue for marketers to profiteer.
Kyari stated, “I’ve made it very clear that it is practically impossible (to stop smuggling) in the arbitrage environment, and also in a situation where your neighbours are helpless, for you to say that there’ll be no cross-border movement of petroleum products.
“It is simply impossible to stop this until you are able to resolve this arbitrage issue.”
He pointed out that Nigeria was dealing with a distribution issue, stressing that NNPC has enough stock in-country.
“So definitely, what you’re dealing with is a logistical challenge, rather than anything else,” Kyari said. “Once you are able to put more products into the market, deliver more than what the country needs, that is essentially what we have to do so that we can achieve that optimum level,” he argued.
The NNPC chief executive revealed that in Abuja, for instance, whereas under normal circumstances, the city got around 120 trucks of petrol daily, that figure had now climbed to 150 trucks in the last one week.
He added, “So we know that the solution is excess supply. Once we are able to do excess supply across the country, across locations, you’re going to resolve this issue and that is exactly what we are doing now. We are ramping up evacuation today in many places.”
The NNPC helmsman said the daily evacuation was now 70 million litres per day nationwide. He assured that in the next one week, the petrol queues would reduce substantially.
Kyari stated that the ultimate solution was to ensure that the pipelines worked. He said it was the reason NNPC recently selected some companies to operate the facilities on a Build, Operate and Transfer (BOT) basis.
He said regarding the long petrol queues, “I believe very strongly that within the next one week it will clear. I’m not saying that you’re going to have zero queues. We know we can’t guarantee that because a number of things are out of our control.
“And, of course, the market forces will determine some of these issues. But I believe that we are going to see substantial and relative ease compared to today in the next one week.”
The NNPC head said the national oil company’s remittances to the federation account were withdrawn because they were used to offset mounting subsidy costs, instead of waiting for the finance ministry to issue cheques every month.
He stated, “We have fiscal obligations because whatever you do, and ultimately whatever money NNPC makes is from the fiscal obligation, taxes, royalties and margin, all three as of today, because we have not diluted the ownership of this company, all belong to the state today.
“So the only way you can do this is to hold back so that we can use that to buy the product and come and sell it to the market.”
While apologising to Nigerians for the hardship caused by the fuel scarcity, Kyari described the situation as unfortunate, and insisted it was not meant to punish the citizens.
“First of all, I apologise on behalf of all of us who are stakeholders in the oil and gas industry,” he said. “But I will say this is unfortunate. It’s a glitch. We are responding to this glitch. We’ll resolve this and bring succour and relief to Nigeria and there’s no doubt about it,” he stressed.
According to Kyari, when the Dangote refinery and other facilities begin operation, the source of supply will be closer to the country, and many of the current challenges would disappear.

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