The group chief executive officer (GCEO) of Nigeria National Petroleum Company Limited (NNPCL), Mele Kyari, has disclosed that President Bola Tinubu has ordered the putting in place of palliatives to cushion the effect of removal of fuel subsidy on Nigerians.
He also insisted that there was no going back on subsidy removal, as it was quite apparent that Nigeria can no longer afford the subsidy payment.
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The NNPCL boss, who disclosed these after meeting behind-closed doors with members of the National Working Committee (NWC) of the ruling All Progressives Congress (APC) at the party’s national secretariat in Abuja on Thursday, said the NNPCL won’t continue to be sole importer of oil in the country.
Kyari stated: “There is a gradual process now of making a flexible and single effect regime. Everyone will be able to have access to foreign exchange and there is a transition going on now.
“And NNPC cannot continue to be sole importer. We know that this is going to vanish and the market will stabilise this.”
Kyari also confirmed ongoing rehabilitation of the nation’s four refineries, saying one of them will start operations this year.
“There is an ongoing process of rehabilitation and one of the refineries will come on stream this year. The second will come on stream next year and the third will come in 2025,” he stated.
Noting that the country can no longer sustain the subsidy regime, the GCEO said subsidy bills have piled up.
He stated: “The country is not able to settle NNPC for the money we are spending on the subsidy. Therefore, pricing this petroleum at the market is the right thing to do at this time. We believe that this will benefit the overall country in the long run and in a long term.
“I am aware that Mr President has directed some engagement and some palliatives will be put in place, and I am very sure this will happen.”
Kyari further said while there was provision for subsidy in 2022, not a single Naira was provided to finance the subsidy in 2023.
He continued: “And ultimately, while we held back our fiscal obligations, we still have a net balance of over N2.8 trillion that the federation should have given back to the NNPC.
“For any company, when you have negative N2.8 trillion, there is no company in the whole of Africa that will lend to you. You cannot have receivables. The provision of subsidy is there but absolutely there is no funding for it. It means it is only on paper. So, it doesn’t exist.
“So we no longer can bear it because of liquidity. If we continue we will run into defaults and the defaults of NNPC is the default of Nigeria. Once NNPC goes into defaults and liquidity, it affects every borrowing done by the country. Even the sub-nationals. Your lenders will come back to you and say your country can no longer pay.”
On the benefits of subsidy removal, Kyari said when President Tinubu declared in his inaugural speech that subsidy was gone, the bond market appreciated within 24 hours.
Tinubu’s target, he pointed out, was to have 7 per cent growth of GDP, which he said cannot be achieved if there is distortion in demands and consumption patterns.
He added: “It is nothing else other than the statement around subsidy and balancing of the apex market. These two elements are major concern that every investor all over the world, every partner that we have is worried about. What is your apex regime and how do you deal with your subsidy?
“They know that this subsidy constitutes a huge amount of money and this country may not be able to survive and pay its debts. It is very clear that everybody understands this.
“Before today, the average subsidy level was N400 billion every month. That means every month you can do one major capital project from money that you do not have. This is really what it means. There is nothing anybody can do about it. There is this common argument that the masses will suffer.
“That we are going to have problems with them. I agree. That once you increase prices of this proportion, as it has happened, it will have impact on inflation. There is no doubt about it. It is very typical also, It goes up and down. The market determines what happens next.”