Article Summary
- Mele Kyari, the GCEO of the Nigerian National Petroleum Company, has stated that the recent increase in fuel pump prices will lead to heightened market competition.
- The removal of fuel subsidies and the alignment of prices with market rates will attract more oil marketing companies to invest in Nigeria’s oil market, benefiting the economy.
- Kyari emphasized that the market will regulate itself, reducing inefficiencies and fuel smuggling while making industry data more credible.
The Nigerian National Petroleum Company Limited (NNPCL) has stated that the recent increase in fuel pump prices will lead to enhanced market competition in the downstream sector.
Mele Kyari, the Group Chief Executive Officer (GCEO) of NNPCL, made this statement during an interview on Arise Television today, June 1. Kyari emphasized that the adjustment, aligning pump prices with market rates, will promote competition and efficiency in the industry.
He said that many oil marketing companies have previously stayed away from the Nigerian market because of the fuel subsidy regime. But now that prices will reflect the market realities, more companies will be willing to invest in Nigeria’s oil market.
He said:
- “The beauty is that there will be new entrants into the market, their reluctance to come into the market all along was the subsidy regime and that regime does not guarantee repayments back to those who provided the product at subsidized prices. Now that the market regulates itself, oil marketing companies can actually import products or produce locally. They can take the product into the market, sell it and get their money back.”
Kyari said that by law, NNPCL cannot do more than 30% of the market going forward. He highlighted the fact that as soon as the market stabilizes, oil marketing companies are able to come in.
Then the market will regulate itself. He also said Nigerians will continue to see price adjustments as the market dictates and all the inefficiency burdens in the system will reduce because of competition.
Why the upward adjustment in price now?
While speaking to the fact that a provision was made in the 2023 budget that the fuel subsidy regime will exist until the end of June 2023, Kyari said the financing was just not available any longer. He said:
- “You can make a provision in the budget, but you must finance it, and that financing part is absent. In 2022 when that provision was made, nothing was paid to the NNPC to provide those subsidies. The implication is that you have to take the cash flow of the NNPC to continue to sustain the regime, this has become a daunting task for the NNPC.”
According to him, the prices Nigerians are seeing today are reflective of the current market price of the commodity. What this means is that prices in the market can go down at any time and the market will adjust itself.
Kyari pointed out that the prices released on May 31, are not fixed prices and the prices were fixed based on costs by location and existing realities.
Addressing fuel smuggling and data issues
According to Kyari, the fuel subsidy removal and the upward fuel price adjustment will make industry data more credible, and the new reality will also reduce fuel smuggling to neighboring countries.
He provided context using the situation where Nigeria was selling fuel at N195 per liter meanwhile other neighboring countries were selling at over N500 per liter. In this context, some stakeholders took advantage of the system and engaged in fuel smuggling.
But now that the status quo has changed, it will no longer be products smuggled to other countries but an expansion of fuel trade.
