Average daily PMS consumption hits 60 million, PENGASSAN tells Reps

The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) disclosed that the average daily premium motor spirit (PMS) consumption in the country at 60 million litres per day.

The details were contained in the document presented to the House of Representatives’ Ad-hoc Committee investigating the actual daily consumption of Premium Motor Spirit (PMS) in Nigeria’, chaired by Hon Abdulkadir Abdullahi.

According to PENGASSAN Deputy President, Comrade Owan Abua, total of 14 million litre of AGO (diesel), 0.74 million litre of DPK/HHK (Kerosene) and 3 million litres of ATK (aviation fuel) are consumed daily in the country.

He explained that the average daily consumption was arrived at using Truck-Out from Depots as a yardstick for the estimation, while consumption was estimated from the average of actual Truck-Out volumes from coastal Depots in 2021 and adjusted for population and GDP growth rates.

He also said that population increase index of 3.2 per cent and GDP rate of 2.7 per cent was used to arrive at the estimated consumption rate.

On its part, Nigeria Customs Service (NCS) put the total volume of PMS imported into the country between 2015 and June 2022 at about 2,380,814,974.418 metric tonnes in 3,703 vessels, while 876,801,931.515 metric tonnes of PMS in 1,296 vessels were exported within the period.

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Also at the investigative hearing, NGF’s Head, Legislative Liaison, Peace & Security, Hajiya Fatima Katsina presented the Governors’ findings on the volume and pricing of PMS are detailed in a November 2021 report by the National Council (NEC) Ad-hoc Committee – interfacing with the Nigeria National Petroleum Corporation (NNPC) on the appropriate pricing of PMS in Nigeria.

According to her, the Committee was chaired by Governor Nasir el-Rufai of Kaduna State, with membership comprising the Governors of Edo, Jigawa, Ebonyi, Akwa Ibom, Ekiti, the CBN Governor, the Minister of Finance, Budget and National Planning (MBNP), the Accountant General of the Federation, Group Managing Director of the NNPC and the Permanent Secretary, MBNP.

“Although the operating environment has significantly worsened since the report was released, with NNPC now consistently reporting zero remittance to the federation accountant as profit from joint venture (JV), production sharing contract (PSC) and miscellaneous operations, the position of the Forum remains generally the same.

“The report had noted that ‘federation (FAAC) net oil & gas revenues have been declining since 2019 and are projected to decline significantly in 2022 by between N3 billion and up to N4.4 billion unless action is taken now.

The NGF said its finding revealed that “remittances to the Federation Account Allocation Committee (FAAC) have continued to shrink as NNPC recovers shortfall ‘quite arbitrarily’, from the Federation’s crude oil sales revenue. FAAC deductions for PMS subsidy are above 2019 levels, even without adjusting for the reduced purchasing power of the Naira due to inflation and FX rate deterioration

“An analysis of the average monthly PMS consumption by States showed that a-third of the country accounts for over 65 per cent consumption of PMS. The analysis showed that Lagos, Oyo, Ogun, Abuja, Delta, Kano, Kwara, Edo, Rivers, Kaduna, Kebbi and Adamawa accounted for 65 per cent of PMS consumption in the Country.

“Most States with high PMS consumption either have borders with neighbouring countries or are in close proximity, this has been an avenue for smugglers to benefit from profitable arbitrage opportunities in PMS pricing.

“Households directly consume only about 25 per cent of the PMS that is consumed nationally, with the remaining three-quarters being consumed by firms, MDAs, transport operators or smuggled to neighbouring countries where the PMS price is nearly three times what it is in Nigeria.

“Of the PMs consumed by households, the richest 40 per cent of households account for over three-quarters of the PMS purchased by households, while the poorest 40 per cent of households purchased less than 3% of all PMS sold in Nigeria.

“In the current fiscal regime, remittances to FAAC would continue to shrink as NNPC recovers this shortfall from the Federation as a result of crude oil price recovery. The report recommended a PMS pricing structure that addresses regional arbitrage and smuggling of PMS and provides additional revenue to the Federation Account.

“There is a significant market opportunity for additional export revenue streams for Nigeria to be had given the price parity with our neighbouring countries.

“Privatisation of the three government refineries as is, or after their full rehabilitation if affordable and viable, and expediting the licensing procedure for modular refineries will reduce the recurring government expenditure on refinery maintenance and increase the country’s refining capacity.

“There were also economic risks highlighted in the report. Fiscal pressures are threatening Nigeria’s recovery, as rising prices continue to push millions into poverty.”

The Forum said further that rising inflation between 2020 and 2021 is expected to have pushed an additional 5.6 million Nigerians into poverty, while good insecurity is increasing in both poor and non-poor households, with some adults skipping meals.

“Fiscal pressures are growing unsustainably with the PMS subsidy significantly reducing the flow of revenues into the Federation account. 35 out of 36 states are likely to see transfers from the federation fall (in Nominal terms) between 2021 and 2022, with the average decline projected to be about 11 per cent.

“Most States are already experiencing fiscal stress, with 30 out of 36 states recording fiscal deficits in 2020, including Lagos and every oil-producing State except Akwa Ibom.

“With the projected decline in gross distributable federation revenues in 2022, fiscal deficits and debt burdens will grow even larger and faster. This will mean that transfers from the federation will not be enough to cover even salaries, and certainly not recurrent costs, which are growing in nominal terms.

“With the coming into effect of the Petroleum Industry Act, gross oil & gas revenues could be (much) lower than currently projected because of the new fiscal terms and the earmarking of deductible revenues specified in the PIA, and that could reduce net oil & gas revenues even further.

“Greater accountability and transparency around oil and gas revenues are the only immediate options for easing the pressure on government finances and maximising socially responsible profit gain. The Mid-Stream Regulatory Authority established by the PIA 2021 concentrates on promoting price competition and lowering prices charged to consumers. It also avoids the continued politicisation of government involvement in PMS price-setting.

“This option minimises corruption, streamlines consumption, sterilises smuggling and is more effective. Immediate checks and balance would be the recommended next step. It is our prayer that Nigerians can benefit from the bounty that God has blessed our nation with, and that Nigerians can enjoy the special privileges of being members of an oil-producing nation.”

On his part, the President of Nigeria Labour Congress (NLC), Comrade Ayuba Wanna who kicked against the removal of fuel subsidy argued that the “volume of PMS claimed to be imported into the country is much higher than what is actually imported and by extension much bigger than the national consumption -capacity.

“This is done through over-invoicing or other processes of criminality at a huge Cost to Nigeria and its people. This criminal enterprise is perpetrated by a tiny privileged clique accustomed to circumventing the rules.”

The NLC President who was represented by NLC’s Head Information, Comrade Benson Ukpa maintained that the “frequent increase in the pump price of petroleum products is the presumption that Nigeria imports xyz volume of refined PMS for its internal consumption and the subsidy on this volume is so humongous that it is killing the economy.

“Accordingly, subsidy on the imported volume should be totally removed in order to free up resources for the development of the critical sectors of the economy.

“Another school of thought holds the view that the volume of imported PMS Is in excess of the national need and the excess is illegally sold across the border. And because the PMS is retailed at a great subsidy, the illegal cross-border sale constitutes a huge cost to Nigeria.

“Accordingly, full deregulation of the downstream sector of the oil sector should be achieved in order to remove distortions in the pricing structure of refined products, especially PMS. This, they argue, will not only make the illegal cross-border trade unprofitable, it will earn more money for the country.”

While frowning at the level of impunity being perpetrated in the industry, Comrade Ayuba said: “In our view, it is the activities of this criminal gang, clearly above the law, that are responsible for the costs associated with PMS, the costs passed off as subsidy.

“We do believe that even if there is subsidy, it cannot be at the level quoted by authorities in the sector.

“In our document on the oil sector, we have outlined conditions precedent for removing subsidy, if any, including fixing the refineries, creating conditions for private sector participation in the building of refineries, even if they are modular.”

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