The federal government has proposed to review the pricing policy for petrol to save the Nigerian National Petroleum Corporation (NNPC) from the burden of under-recovery in the downstream sector.
Under-recovery occurs when the expected open market price of petrol, including cost of importation and distribution, falls below official pump price, a situation which made NNPC record under-recovery of N49.86 billion between January and March this year due to high crude oil prices.
In the new policy, the price of the product would be dictated by the global price of crude oil.
This means that consumers would have to pay/less when the barrel of crude is high/low.
Speaking at the African Downstream Oil Trading and Logistics (OTL) Expo 2017 held Lagos, the minister of state for petroleum resources, Dr. Ibe Kachikwu said Nigeria must find a formula-based pricing system that allows consumers to enjoy friendly prices.
“This would enable investors forecast with some degree of accuracy cost recovery and returns on investment. Fiscal conditions of the downstream are being considered. Multi-layer charges by various arms of government must have to be streamlined. The fiscal policy review document is currently being processed,” said the minister.
On the challenges confronting the downstream sector, Kachikwu, who was represented by the deputy director, upstream in the ministry of petroleum resources, Mr. Kamoru Busari, said the refineries were not working optimally while the pipelines either rupture or suffer from vandalism.
“The refineries continued to struggle and they are down most of the time. Most of the pipelines are either being vandalised due to militancy or are ruptured over a period of time due to non-replacement. A lot of money are (SIC) being owed marketers from the subsidy era.”
He offered some solutions to include attracting investment into the refinery sector, embarking on massive rehabilitation of the existing ones as well as establishing green field facilities to save the country from importing petroleum products.
To enhance liquidity in the sector, the minister said he was working with the Central Bank of Nigeria to ensure access to foreign exchange adding that government would put in place a domestic funding line to enable investors have access to funds.