Subsidy: NNPC, CBN, others to brief Senate on refineries status

Tunde Opalana, Abuja

Determined to find lasting solution to continuous payment of subsidy to oil marketers on importation of petroleum products, the Senate has invited top officials of government departments and agencies in the oil sector for full briefing.

Also expected to shed light on the present conditions of the nation’s refineries among other issues is the minister in charge of petroleum resources after full inauguration of cabinet ministers.

The Senate committees on Petroleum (downstream and upstream) have to that effect been mandated to invite the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) to brief the Senate on the status of the existing refineries in the country.

The upper chamber as well charged the committees to call relevant stakeholders including the Central Bank of Nigeria (CBN) and private sector to advise the Senate on oil subsidy.

The Senate resolution followed a motion titled: “Existing petroleum subsidy: Ensuring self-sufficiency in domestic refining of petroleum product,” sponsored by Sen. Rose Oko (PDP – Cross- River) and 42 others.

Contributing, senators viewed the motion from different perspectives with a few of them kicking against removal of subsidy.

Specifically, Senator Ali Ndume, stood his ground that subsidy should not be removed.

“The refineries have been there. We cannot deny simple law of economy of demand and supply. There is the need why refineries are not working optimally. The solution to the subsidy issue is adequate supply.

“The Ad-hoc committee should find out which refineries are not working and what should be done. Report me well; I am not in support of removal of subsidy.”

Leading the debate, Senator Oko said that although Nigeria produces 1.7 million barrels of crude oil per day, but its moribund refineries had very little refining capacity.

The lawmaker noted that between 2006 and 2018, at least N10 trillion has been spent on petrol import subsidy, adding that in May 2019 the Senate criticized the payment of N11 trillion to oil marketers as subsidy in the last six years.

She said the nation imports roughly 90 per cent of its fuel, negating much of the benefits accruing to oil producing nations from high crude prices.

Oko pointed out that despite the resources expended on turn around maintenance, none of the NNPC’s four refineries currently functions up to 50 percent of their combined capacity of 445,000 barrels per day.

She said the objective of modular refineries was to overcome the huge capital requirement that impedes establishment and maintenance of large scale refineries.

This, she said would ensure self sufficiency in the production and supply of petroleum products.

She said data from the Department of Petroleum Resources (DPR) website had indicated that a total of 633,000 barrels per day refining capacity had already been lost due to the expiration of licenses of both conventional and modular refinery projects.

Oko, who also spoke on the fuel subsidy, said more than 160 million dollars was spent on subsidy in early 2017 as the national oil company absorbed cost due to an increase in crude oil price.

Narrating the history of subsidy, the lawmaker said that Nigeria introduced petroleum subsidy in the 1980s as a temporary measure aimed at strengthening the local refining industry and improving product affordability and domestic consumption.

She lamented that the move has become a permanent feature of the nation’s economic life and has not only continued unabated, but has sky rocketed over the years as successive administrations have failed to make Nigeria self-sufficient in domestic production of refined petroleum products.

The lawmaker said despite the dire need to exit petroleum importation and subsidy, there was neither a comprehensive plan to ensure its actualisation.

Oko said there was no form of technical and financial aid for refinery license holders to ensure the refineries become operational.

Senators Barau Jibril, Thompson Sekibo, Ifeanyi Uba among others, who supported the motion, said there was an urgent need to ensure the optimal performance of the refineries.

They also called for grants to support the actualisation of the 43 modular refineries in the country.

The Senate in a voice vote urged the committee on petroleum downstream and upstream, when constituted to report back to the senate on the status of modular and existing refineries in eight weeks time.

In his remark, the President of the Senate, Ahmad Lawan, who presided over the plenary, said that there is the need to ensure that operators of the 43 oil licences fully utilize the opportunity given to them.

He pointed out that it is imperative that the existing refineries are optimally functional and ensure refining of crude products.

Lawan was optimistic that when the Petroleum Industrial Bill (PIB) becomes fully operational, it will no doubt resolve issues around continuous payment of subsidy on importation of petroleum products

He said the PIB regime will afford different stakeholders especially the private sector in the oil and gas sector to full participate in the future industry.