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Sunday, 8 January 2012

Nigeria labour Congress- N141 is not the price of petrol

Organised  labour and other interest groups have faulted the N141 per litre of petrol template being used by the Petroleum Products Regulatory Agency and the Federal Government in selling the product to Nigerians.
This is even as a top official of the Nigeria Labour Congress is raising the alarm on how the huge quantity of locally-refined petrol, which is selling at the same price (N141 per litre) as the imported one, is being costed and sold in the country.
The acting General-Secretary of the NLC, Mr. Owei Lakemfa, told SATURDAY PUNCH in a telephone interview on Friday that the N141 per litre was not in anyway tenable in a supposed era of deregulation that started on January 1, 2012.
He said that it was only logical for the locally-refined fuel to be sold at a cheaper price than the fuel being imported into the country, whose landing cost is subject to the dictates of the international prices of crude oil.
Lakemfa insisted that the percentage of fuel being produced locally, which was acknowledged by the government, did not include port charges, insurance, demurrage, charges by small vessels engaged to offload products at the Atlas Cove and other costs that were built into the landing cost of fuel.
He said, “It’s very clear that what the FG has done is just to increase the fuel price. The major objective is simply to raise more funds to share with the governors. You know these people have spent so much money on elections, so they want to get some of the money back.
“They are telling people that they want to dualise the East-West Road and others. How can you talk of constructing the East-West Road that has been budgeted for? That matter has been on and even the Obasanjo Administration decided to dualise it. The entire amount of money you need to pay is not more than N40 per litre.
“If you have local refineries and we have dedicated barrels for local consumption, it means that the litres of petrol from the refineries that are functioning won’t have the freight, the demurrage, the cost of the smaller vessel that offload, insurance and others.
“These people are not interested in all that. They are only interested in making cheap money and forcing Nigerians to pay through their nose for petrol to get money to share with the governors.”
Lakemfa’s comments followed recent comments made by the Minister of Petroleum, Mrs. Diezani Alison-Madueke, at the Town Hall Meeting organised by the Newspaper Proprietors’ Association of Nigeria in Lagos that the refineries in the country were producing about 30 per cent of the refined products being consumed in the country.
Alison-Madueke said that the FG had put in sustained efforts to ensure that the refineries, which were producing at 30 per cent of installed capacity, increased production to between 50 and 60 per cent.
“Our refineries, when we came into government 16 months ago, were running at about 30 per cent or more capacity utilisation. We have worked very hard and aggressively to ensure that at this point, they are between 50 per cent and over 60 per cent capacity utilisation, producing almost 30 per cent of our locally needed refined products at this time.
“We have gone beyond that to ensure that we bring in the original contractors, who built our traditional refineries – Kaduna, Warri and Port Harcourt, to come in and this time, handle the Turn-Around Maintenance themselves, simply to show the Nigerian public that we’re serious, and this is the only way we can do it,” she had said at the THM.
A source, however, said that the refineries were even producing more than the figures quoted by the minister.
The source said that both the Warri and Port Harcourt refineries were producing very well, adding that it was only the Kaduna refinery that was not producing because of the problem of pipeline sabotage.
The source said that government officials were deliberately under-quoting the rate of production of the refineries to collect subsidy on a huge quantity of products locally refined in the country.
However, Lakemfa said the PPPRA was only motivated by a desire to make more money for the federal and state governments by embarking on a crushing increase in the prices of petroleum products in the country.
He said that those who pushed for the pump price to be increased from N65 to N141 per litre were only motivated by the need to recoup the huge amount of money they expended on funding their April 2011 elections.
He argued that the current price that was fixed by the PPPRA had nothing whatsoever to do with the figures that were being reeled out by government officials.
Also, a non-governmental organisation, the Save Nigeria Group, had in a communiqué after its meeting on Thursday, said an independent research it conducted showed that the four refineries had a total installed capacity of 445,000 barrels per day.
It stated that the current capacity of the refineries was 133,500 barrels per day (or 21.2m litres, 30 per cent of installed capacity) due to ageing equipment.
The SNG added that the required domestic consumption for petrol was 12m litres.
“This means that even our moribund refineries can actually meet our local consumption need for petroleum,” it added.
The group stated, “The cost structure of crude oil production includes: findings/development, $3.5; production cost, $1.5; refining cost, $12.6; pipeline/transport, $1.5; and distribution/bridging fund margin, $15.69.
“With this, the total sum cost per one barrel of petroleum anywhere in Nigeria will be   $34.8; then one litre will cost $34.8/159 litres, which will be $0.219; 9).
“To get the naira equivalent, multiply $0.219 by N160 (i.e. the current exchange rate of the naira to the dollar): 0.219xN160 is N35.02k. When we add tax – N5 to N35.02, the total cost is N40.02; 10).  Thus, the actual cost of petrol per litre in Nigeria is N40.02. As you know, locally-refined products cannot be sold at international price.”
But denying that the Nigerian National Petroleum Corporation is swindling Nigerians, the corporation’s Group General Manager, Public Affairs, Dr. Livy Ajuonuma, explained that the company bought crude oil for local refining at international price.
According to him, the cost of crude constitutes 80 per cent of the pump prices being paid by consumers at petrol stations, irrespective of where it is processed.
He said, “If the crude is processed in Kaduna, transport cost is also involved. Of course, the cost of transport, insurance, bridging and freight would be lower if you process in Kaduna than if you process in the United States.”
According to him, the differentials in these costs are taken into consideration by the PPPRA in arriving at its templates.
Ajuonuma stated that this explained a price range given by the PPPRA because some products were refined in Nigeria.
He said, “This is the duty of regulation. They give you a price range. Right now, the NNPC is selling petrol at N138 per litre. That is because it is producing locally. This is what we have been saying all along. It is a transparent thing.
“We don’t sell our products to other marketers because we’re in competition. They can source their own products from anywhere. Let us keep our eyes on the price of crude oil. There might be a teething problem with the new process, but let us give it a trial.”
There have been protests by Nigerians since the FG shocked the nation by removing the subsidy on petrol last Sunday. This has led to the product being sold for between N138 (at NNPC stations) and N250 in different parts of the country.
The NLC has called a nationwide strike for Monday to force the government to rescind its decision to remove the subsidy and return the price to its pre-2012 template of N65 per litre.

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