The Nigerian National Petroleum Company Limited (NNPC) yesterday said it was working hard to resolve the current petrol scarcity being experienced across the country.
Executive Vice President, Downstream Operations, at NNPC, Dapo Segun also blamed the present shortages on foreign exchange illiquidity, distribution challenges, and the need to balance imports with existing debts.
Segun spoke during an interview on Arise News, the broadcast arm of THISDAY newspapers.
Although he stated that NNPCL was actively working to resolve the supply shortfall, Segun did not provide a specific timeline for ending the long fuel queues.
He emphasised that a significant challenge in the market was the reluctance to allow prices to be determined by market forces.
Segun said, “First, we have conditions that affect our ability to distribute fuel efficiently. We do have a constraint of FX illiquidity. And when you have that situation, you have to strike a very fine balance between the size of your debts and the volume of products that you import.
“It wouldn’t make sense to import so much more than you can reasonably and create a situation where your debts become unserviceable. So it’s a fine balance that we have to draw between those two, between those two – the size of the volume of PMS that we import and the size of our payables that’s mainly driven by FX liquidity.”
He added that even with debts owed, the suppliers trust that they would pay, insisting that NNPCL has a good business relationship with all its foreign customers.
Segun stated, “We have a good relationship with our suppliers. And as we speak, we don’t have a problem with the supplies coming in. We do have a challenge with payments, and that’s largely due to the fact that there is some FX illiquidity, as it’s obvious, and that’s really is the challenge.
“As much as we are able to, we are making payments to them and talking about the debts. I wouldn’t want to go into that issue, but yes, there is a debt. There may have been a denial of the exact amount that was posted in the media.
“Yes, there is a debt. It’s not news to anyone, but we’re doing all we can to make sure that we retain the confidence of our suppliers, and I can assure you that our suppliers have confidence in our ability to pay.
“NNPC has never defaulted in making its payments, and that’s why suppliers continue to back us up.
“The good thing also is that we have Dangote refineries coming up with production, as it’s been announced, and that will also provide a source of supply into the country.”
He stated that as a confirmation of its good faith, NNPCL had supplied the Dangote refinery over 30 million barrels of crude oil in the past, with 17.6 million barrels to be made available in the coming months.
Segun explained, “We have provided over 30 million barrels of crude oil to Dangote refineries so far. This month alone, we will be providing 6.3 million barrels of crude oil to Dangote refineries in seven cargos, and in October, we’ll be providing another 11.3 million barrels of crude oil to Dangote refineries in 13 cargos. So we’re doing everything we can to make sure that this situation abates as soon as possible.”
He added that Section 205 of the Petroleum Industry Act (PIA) said fuel prices should be determined by unrestricted market-based conditions.
Segun said while the government might intervene with policies where it deemed fit, the sustainable approach was to allow for free market pricing of petrol.
He said, “In section 205 of the PIA, it should be free markets, unrestricted market-based conditions. Government policy would come in, and that happens as the government would deem to bear some of that, where the government deems it necessary.
“What is sustainable is the unrestricted free market pricing of PMS. That way competition takes over, and Nigerians will get it better.”
He did not give a deadline regarding neither the end of the long fuel queues nor commencement of production by NNPCL refineries, stressing that projections can always go wrong.
According to Segun, “Even when you give projections, projections are at best estimates at any time. And if you look at even the best analysts in the world, when they give their projections, they put a disclaimer there and say, this is subject to change. There’s a limit to how much into the future you can see.”
Thisday
