The Nigerian National Petroleum Company (NNPC) Limited said the country’s monthly petrol subsidy bill, valued at over N400 billion, was difficult to bear.
Speaking on Monday, at the inauguration of the Dangote Petroleum Refinery in Lagos, Mele Kyari, group chief executive officer (GCEO) of the national oil company, said while local refining can ensure adequate supply, it cannot compensate for subsidies.
President Muhammadu Buhari had inaugurated the 650,000 barrels per day (bpd) project, describing it as a game-changer for the downstream petroleum products market, not only in Nigeria but the entire African continent.
The $19 billion facility is said to be designed for 100 per cent Nigerian crude with the flexibility to process other crude from other countries.
Speaking at the inauguration ceremony, Kyari said the NNPC Limited will continue to support investments in domestic refining to satisfy growing demands for refined petroleum products in both local and regional markets as against simply exporting unprocessed crude to diminishing markets overseas.
“The external shocks in recent years from COVID-19 and the conflict in Europe are tangible reminders that energy is not just a business but a vital component of national security,” he said.
“Reliable access to fairly priced energy is the key to domestic economic growth, job creation, and sustained democracy in a stable international order.
“As the world transits to cleaner sources of energy on account of climate change concerns, many developing countries across Africa and Asia are left to contend with energy poverty while managing the impact of climate change.
“Nigeria, Africa as a whole produce a small amount of carbon emissions, but we profoundly suffer the consequences of the gathering climate emergency: flooding and drought, sometimes simultaneously; tensions over land use, and the list is very long.
“That is why the Dangote Refinery, with the new deal that we have been building, supported by the enabling Petroleum Industry Act (PIA), will surely provide domestic security of supply in our country.”
However, Kyari said the lingering challenge of subsidising premium motor spirit (PMS) is clearly “getting out of the capacity of the state to bear”.
He added that the “differentials that domestic refining would provide is insignificant and cannot compensate for the subsidies”.
“It is very difficult to bear subsidy bills in excess of N400 billion every month,” he said.
Kyari also confirmed NNPC’s 20 per cent equity stake in the Dangote refinery.
In August 2021, the federal executive council (FEC) approved the sum of $2.76 billion for the acquisition of the minority equity stake.
Meanwhile, following a N3.35 trillion subsidy budget in 2022, the federal government had promised to end under-recovery payments next month.