A Review of the Nigerian Energy Industry

Smugglers, peddlers, others bane of effective kerosene supply – NNPC

nnpc19 February 2014, Abuja – Revelations emerged Tuesday that a combination of forces may have been working behind the scene to subvert the good intention of the federal government to provide kerosene to Nigerians at the subsidised rate of N50 per litre.

As a result of this and the increasing demand for the product by many Nigerians, the Nigerian National Petroleum Company (NNPC) has suggested that the National Assembly should throw its weight behind its proposal to replace the use of kerosene with the liquefied petroleum gas (LPG), which volume for domestic consumption is now at an appreciable threshold.

These were the highlights of the NNPC’s presentation presented by the Petroleum Products Marketing Company (PPMC), which its Managing Director, Haruna Momoh, submitted at a public hearing on supply, distribution and expenditure of kerosene subsidy from 2010- 2013 held at the premises of the House of Representatives by the House Committee on Petroleum Downstream.

This is as the Minister of Petroleum Resources, Mrs Diezani Allison-Madueke, gave the policy thrust of the government on the product within the period under review as effort to curb the difficulties that surfaced following a conflicting  presidential directive on the removal of subsidy on kerosene in 2009.

Alison Madueke explained that the purchase of the product became the sole monopoly of the NNPC in order to ensure its regular supply and check the activities of marketers.

Another problem she identified, which according to her necessitated, the incumbent administration to take the step it took, was the delay by the ministry of finance under late President Umaru Musa Yar’Adua, to effect payments intended to cushion the effects of the subsidy withdrawal it planned.

She said the NNPC had to resort to bridging the product in order to tackle the problem, which had many aspects.

Momoh outlined the challenges surrounding the supply and distribution of kerosene within the country as its smuggling to neighbouring countries,  its purchase by giant industries, its use in the aviation industry as fuel for airplanes and the activities of middlemen and peddlers, who were responsible for the skyrocketing of its price beyond the regulated figure.

“DPK as supplied to the Nigerian market has various phases. The intention of government is to make it available to the common man. However, from my own experience and research on the field, there is a totally different picture from what government has in stock,” Momoh stated.
He said despite the challenges, the gap between demand and supply can still be bridged if efforts are consolidated to secure the stretch of 5,120 kilometres from the activities of vandals. But he proffered that in view of the product’s attraction as a component of aviation fuel globally, its futuref use for domestic purposes “is a value destruction.”

Instead, he suggested that with the increase in the production of the LPG, over 800,000 metric tonnes of which was earmarked for domestic use, by the government, attention should shift to campaign for wider use of it “thereby reducing the pressure on kerosene.”

Worried by the shortage of kerosene, the House urged the NNPC to step up supply of the product in 2011, a development that led to the increase of the daily supply to 11 million litres.
Meanwhile, the corporation also noted that it funded same subsidy on kerosene from unrealisable  sources of revenue flows even though it failed to give lucid details of the unrealisable revenue flows.

A statement from the acting Group General Manager Public Affairs of NNPC, Dr. Omar Ibrahim, in Abuja disclosed that both the Group Managing Director of NNPC, Andrew Yakubu and the company secretary, Anthony Madichie made these disclosures at the investigative hearing on kerosene subsidy organised by the House of Representatives.

The statement quoted Yakubu as saying that the diversion of kerosene to neighbouring countries, industrial use, aviation fuel, sharp practices by middlemen and pipeline vandalism were some of the reasons for its scarcity for domestic consumption.
He explained that due to a number of issues ranging from incessant pipeline vandalism and diversion of the product to road construction, the product, which is meant for the masses is not readily available.

“There are quite a number of competing demands for kerosene and until these are addressed by other relevant agencies, the issue of kerosene not being readily available for domestic use will continue to reoccur every now and then.

“The way out is for this committee to collaborate with the NNPC to encourage the sale of liquefied petroleum gas otherwise known as cooking gas,” Yakubu said.

On his advocacy for the use of liquefied petroleum gas, Yakubu said already the NNPC had stepped up the supply of the product from 65,000 metric tonnes in 2011 to 250,000 metric tonnes in 2013, adding that the target is to grow the consumption of the product to 500,000 metric tonnes by the end of 2014.
He stated that the increase in the consumption of cooking gas would go a long way to reduce the dependence on kerosene which will in turn help in the redistribution of kerosene to those who may still want to consume it.

While responding to a question on the status of kerosene subsidy, he said he had met the practice when he assumed office in June 2012 and that kerosene subsidy is funded by unrealisable revenue flow.

“The NNPC takes crude at international price and sells it at the domestic market at regulated price of N50 per liter,” he stated.

He equally noted that the NNPC  does not have the power to police kerosene marketers and sanction them for diverting the product considering that there are statutory bodies with the responsibility to do same.

On the legality of kerosene subsidy, Madichie cited section 6 subsection 1 of the Petroleum Act which according to him said only the Minister of Petroleum Resources has the authority to fix petroleum product prices.

He stressed that if a presidential directive is given and not gazetted, such directive will not be effective.
Also in his submission to the committee, the Managing Director of the Pipelines and Products Marketing Company (PPMC) which is a subsidiary of the NNPC, Haruna Momoh, said kerosene is sourced for the Nigerian market through importation and domestic refining.

He added that Dual Purpose Kerosene is sold to coastal marketers, Major Marketers Association of Nigeria(MOMAN), Depot and Petroleum Products Marketers Association (DAPPMA) and NNPC retail outlets.

Momoh said: “I can confirm to this committee the statistics for the supply of DPK is as follows.
In 2010, NNPC supplied 2,515,582.44 metric tonnes of DPK, in 2011, NNPC 1,922,263.56 metric tonnes, in 2012, NNPC supplied 2,622,843.20 metric tonnes and in 2013, NNPC supplied 2,671,747.97 metric tonnes making a total of 9,732,437.17 metric tonnes.”

The statement further explained that the Speaker of the House of Representatives, Hon. Aminu Tambuwal who was represented by the Deputy Speaker, Hon. Emeka Ihedioha said that the investigative hearing was aimed at finding a lasting solution to kerosene scarcity in the country.

It equally noted that the Chairman of the House of Representatives Committee on Downstream, Hon. Dakuku Peterside who presided over the investigative hearing stated that the hearing was not to witch-hunt any agency but to work out modalities to ensure that kerosene is bought at the official pump price by the masses.


– This Day

In this article

Join the Conversation