Adetunji Oyebanji, the Chief Executive Officer of Nigeria’s downstream energy firm – 11 Plc, said there is still ‘an element of subsidy’ despite the government’s removal of petrol subsidies earlier this year.
Speaking to CNBC Africa, Oyebanji noted that the Nigerian National Petroleum Corporation (NNPC) is still retailing petrol at N145 even though the price ought to be closer to N155 based on current economic realities; including the forex challenges Nigeria is grappling with. He said:
“Like I did say earlier, when you look at the prices posted by the NNPC for selling gasoline at its retail stations, you find it at N145. But if you look at the template that PPRA has been using in setting prices and even the official exchange rate, you will find that prices at the pump should be significantly higher than where they are today. So, obviously something is not clear as what really is happening. We suspect that there may be some issues to do with how margins are being applied to the various operators and various sub-headings within the template. But we will continue to work with the government to try and get clarification on this subject. But definitely, it is very clear that there is still an element of subsidy.”
When asked about the potential impacts an eventual removal of petrol subsidy could have on the botomlines of marketers and the Nigerian downstream sector in general, Oybanji highlighted several. According to him, the very fact that subsidy removal would could liberalise the market would make it easier for marketers to recoup their costs. By so doing, more investments would flow into the sector, helping to create jobs and even help position Nigeria as a major refining hub in West Africa.
“I always try to make the clarification that the immediate margins are probably more important than looking at the bottomline of operators. We’ve continued to engage the relevant agencies of government, particularly the PPRA, in terms of getting an increase in the margins we’ve had which have been stuck. First, they were changed in 2008 then they were not touched again for another eight years. So, we are trying to get an improvement of that because that will directly impact our bottomlines.
“However, having said that, we believe that when subsidies are removed and you allow for free price liberalisation (which meas that the market will fix the prices at the pump), then that will allow full cost recovery by all the operators. And with that full cost recovery, it means that more investments will be attracted to the industry at all levels of the value chain. And if that happens, it simply means more employment, it means growing economy, and the possibility of Nigeria becoming a refining hub for West Africa.”
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