27 August 2015, Lagos – The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Emmanuel Ibe Kachikwu is insisting that the removal of subsidy would not lead to riots as witnessed in January 2012, stressing that over 90 per cent of Nigerians do not benefit from the subsidy regime.
Speaking in an interview yesterday on Arise Television, a THISDAY sister company, he also revealed the NNPC would explore third party financing to boost the capacity of the refineries to 80 per cent within a 12 to 18-month period.
“The truth is the over 90 per cent of Nigerians today are really not enjoying subsidy. Subsidy is likely in the big cities like Lagos and Abuja and mainly for the rich because the subsidy element does not trickle down to the hinterland and those who are poor,” he said.
Kachikwu, however, stated that rather than deal with subsidy in the sense of absolute removal in the way it is known, the NNPC would create ways to eliminate the perception of subsidy.
“Right now, for example, we have not removed subsidy but petroleum products are selling at market prices due to inefficiencies in the system and people are buying those products and avoiding queues.
“We have got to be intelligent about it; the truth is that as the oil price continues to drop, we are going to face the reality of our time, which is survival,” Kachikwu explained.
He stated that the NNPC cancelled the Offshore Processing Agreements (OPAs) with oil traders so as to have the opportunity to look at the contracts and make them more transparent for Nigerians to get better value than they are getting from the existing contracts.
On his plan to boost the capacity of the refineries, Kachikwu stated that the NNPC would explore every possibility, including third party financiers and investors to go into the refineries and work with the corporation for better management, better production and better Turn Around Maintenance (TAM).
He said the target was to raise the refining capacity from the current 30 to 40 per cent to 80 per cent in the next 12 to 18 months.
“I think the reality is that we lose money for each barrel you put into the refineries because our system is not working efficiently and the equipment is down. The plan is that when you get investors, you get the system cleaned up,” he added.
Kachikwu also hinted that the NNPC was on the road to raise full funding for Train 7 of the Nigeria LNG, stressing also that the corporation would explore the possibility of getting long-term funding for other LNG projects in the pipeline.
He added that the corporation would vigorously promote transparency and the creation of favourable fiscal terms that would encourage investment in the event of deregulation, noting that transparency and favourable fiscal terms would attract investors’ interest in the country.
“The first thing is to be transparent about it. If the rules are clear to everybody in terms of what we are doing and the governance system is very clear and straightforward, you will get a lot of interest.
“So, that is key: first, be transparent and clear about your processes. The second obviously is to create fiscal terms that encourage investment in those areas,” he said.
Kachikwu stated that NNPC would review the country’s fiscal terms in view of the changing dynamics in the operating environment with regards to oil prices and intense competition in the sector.
Answering a question on the impact of the drop in the price of oil on the country’s economic planning, Kachikwu acknowledged that it is currently difficult to plan with the numbers, as the country’s income is dependent on oil.
He however stated that the NNPC would continue to be scientific about it, while emphasis is laid on diversification.
“In addition to that, we are looking at areas of efficiency. How do we cut down cost? How do we stay more focused?” he added.
The NNPC boss noted that there was a time the oil price dropped to $20 per barrel, adding that the current situation is a blessing in disguise.
“We just have to get back to our citadel and see what we were doing in those days. What do we need to do now? It is a time that calls for action?” he said.
Kachikwu added that his reforms in NNPC was what he had done in the oil industry in the past 30 years, stressing that the focus should be on people, processes and the business itself.
“We are beginning very dramatically to focus on the people involved; to clean up the system; to make sure we have the right people in the right place.
“We will get them to focus on the controls, transparency and business model and then we get into the processes – how do we approve contracts? How do we monitor contracts? How do we ensure that there is a pro-business focus in whatever we are doing and finally, we are going into the business dynamics,” he explained.
– This Day