In line with its pledge to dismantle the alleged fuel mafia, President Umaru Musa Yar’Adua has approved the complete deregulation of diesel and other ancillary products.
The ex-depot prices of Automotive Gas Oil (AGO) also known as diesel and Low Pour Fuel Oil (LPFO) will now be at market prices.
The new regime will bring an end to the former system of procuring fuel allocations from the Nigerian National Petroleum Corporation (NNPC) by some petroleum product dealers at ridiculously low prices and selling same at exorbitant prices to users.
Before this latest development, diesel was deregulated but NNPC imports and still sells at ex-depot price of N60, while some marketers in return sell at exorbitant prices to Nigerians.
Following President’s Yar’Adua’s approval, the NNPC has increased the ex-depot price of AGO from N60 per litre to N69, while the price of LPFO was raised from N22 per litre to N44, representing a 100 per cent hike.
A source at NNPC told THISDAY yesterday that “all allocations for AGO, LPFO and other ancillary products are over because if you buy from NNPC, it will be like buying from any other place.”
Confirming this development, Group General Manager, Group Public Affairs Division of the NNPC, Dr. Levi Ajuonuma, told THISDAY yesterday that the Minister of Petroleum Resources, Dr. Rilwanu Lukman, was able to convince the President to allow NNPC to sell the affected products at market prices.
He said: “Under President Obasanjo, AGO was deregulated. But how come NNPC can import and not sell at market price, while others are selling at market price? NNPC will import and a cartel will go to NNPC and buy at ex-depot price and sell at market price. The President has recognised that there is no reason why NNPC can import products and allocate it to few Nigerians at a loss.
“He has done what other previous administrations were not able to do. He has recognised that a government agency like the NNPC should not be used to dispense patronage at the detriment of the government.”
Ajuonuma also said that the move would help position NNPC for the post reform challenges.
Given this scenario, manufacturers, truck owners and other users of natural gas for power generation, LPFO and diesel are to face harder times.
The increase in the price of LPFO automatically hikes the price of natural gas used by manufacturers for power generation.
THISDAY gathered that the agreement between the Nigerian Gas Company (NGC), a gas marketing arm of the NNPC, and Gaslink, a subsidiary of Oando Plc, was that price of natural gas would be benchmarked with the price of LPFO as published by the Pipeline Products’ Marketing Company (PPMC), another arm of the NNPC .
The implication is that when the price of LPFO moves up or down, the price of gas will also move appropriately.
Under this arrangement, the price of a litre of LPFO will always be more than the price of an equivalent quantity of gas by 20 per cent.
This is part of the measures put in place by the government to ensure that gas is the cheapest fuel – in a bid to encourage more Nigerians to use gas.
Meanwhile, The Federation Accounts Allocation Committee (FAAC) has asked the NNPC and Central Bank of Nigeria (CBN) to refund certain sums of money they illegally deducted from the funds due to the national purse.
The money consists of N450 billion which the NNPC was said to have unilaterally withheld from the national treasury without following due process, while the CBN appropriated to itself 1 per cent as commission on the country’s exit from the Paris Club debt of $12.2 billion.
There was a reduction in the amount of federally collected revenue available for the states and the Federal Government to share made up of N317.474 billion in April from N322.967 billion in March. It comprised statutory allocations of N197.378 billion for April as against N203.584 billion of the previous month.
VAT for April was N46.400 billion as against N34.180 billion for March, giving a sub-total of N226.682 billion and N237.764 billion respectively.
Augmentation for April was N90.798 billion and N85.203 billion for March.
On the CBN issue, Minister of State for Finance and Chairman of FAAC, Remi Babalola, at the monthly meeting of the FAAC in Abuja yesterday said: “The Federal Ministry of Finance has received the response of the Central Bank of Nigeria on this matter. The CBN is of the opinion that the 1 per cent commission it charged was an administrative charge to cover the cost of performing its core mandate. They further asserted that the charge was standard for all transactions to its customers, both public and private.
“Furthermore, the bank contends that in international payments, there was a cost attached to funds transfer that is normally borne by the remitter. The CBN concluded by passionately appealing to FAAC for the bank to retain the 1 per cent commission charged. This is premised on the placement of the Excess Crude reserve by the CBN in a secured investment with the Bank for International Settlement. That earned returns in excess of 4.5 per cent in order to preserve the principal value of the reserve.”
According to him, the CBN, in its defence, believed this had earned income for the country that more than offset the 1 per cent commission charged.
Babalola, however, drew attention to the fact that Section 30 (1) and (2) of the CBN Act Cap. C4 2004 stipulates that the CBN “shall receive and disburse Federal Government monies and keep account thereof without remuneration for such services.”
Based on this, the closed door session of the meeting therefore ordered the CBN to bring back the money.
On the NNPC, Babalola and Rebo Usman, Chairman of the Commissioners Forum in the FAAC, said they had succeeded in getting the national oil company to admit that it was unconstitutional to have held back money due to the federation account without first remitting it and then making claims for whatever is owed it with a view to reconciling with the government.
NNPC was therefore given until next month’s meeting of FAAC to make the repayment.
Speaking with journalists, the Group Managing Director of NNPC, Alhaji Mohammed Barkindo, stated that an outstanding debt of N705.52 billion was owed the Corporation by the Federation, being the cost of subsidy on petroleum products.
May152009