Given the new price regime for petroleum products, the Federal Government has disclosed that it did not pay any subsidy on products in January 2016, despite having paid about N1.1 trillion in 2015.
The Minister of State for Petroleum/Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Ibe. Kachikwu, yesterday made this known when he appeared before the House of Representatives’ Ad-Hoc Committee set up to investigate the NNPC’s offshore processing (OPAs) and crude oil swaps arrangement for the period from 2010 to date.
Kachikwu also stated that the country would save $1 billion (N200 billion) from the newly introduced Direct-Sale-Direct-Purchase, DSDP, arrangement in Nigeria’s crude oil for products transaction which is to commence next month, adding that the development was a step towards revamping the oil sector.
He explained that the DSDP was adopted to replace the Crude Oil Swap initiative and the Offshore Processing Arrangement so as to introduce and entrench transparency in the crude oil for product transaction by the corporation in line with global best practices.
The Direct Sale-Direct-Purchase alternative allows for the direct sale of crude oil by NNPC as well as direct purchase of petroleum products from credible international refineries. Formerly, crude oil was exchanged for petroleum products through third party traders at a pre-determined yield pattern.
Kachikwu stated that the DSDP option eliminated all the cost elements of middlemen and gave the NNPC the latitude to take control of sale and purchase of crude oil transaction with its partners, adding that the initiative would save one billion dollars for the Federal Government.
The Minister, said he preferred to focus on the future, rather than dwell on the past, however, gave non-committal responses to questions regarding whether the companies who participated in the swaps were selected through a bid process, whether the programme was beneficial to Nigeria, and several others, preferring to claim ignorance, as he was not the minister or GMD at the time the swaps were awarded.
“When I assumed duty as the Group Managing Director of NNPC, I met the Offshore Processing Arrangement (OPA) and like you know, there is always room for improvement.
“I and my team came up with the DSDP initiative with the aim of throwing open the bidding process. This initiative has brought transparency into the crude-for-product exchange matrix and it is in tandem with global best practices,” Kachikwu said.
Kachikwu also informed the committee that when Nigeria starts operating its new Direct-Sale-Direct-Purchase (DSDP) crude oil arrangement from March, it will be able to net up to $1 billion through cost cutting measures, adding that other that cost cutting, the DSDP will keep the influence of the Minister of Petroleum resources over the process under check, as all the bidders will be assessed transparently based on their global and national track records before the best companies with the requisite capacities are selected.
The DSDP is aimed at reducing the gaps that were obvious in the OPAs and the losses the NNPC incurred from it, this would help NNPC grow indigenous capacity in the international crude oil business, as well as generate employment opportunities for indigenous companies that would be selected.
This is coming as the Federal Government completely halts payment of subsidy on household kerosene, as there are growing fears that marketers will sell the scarce commodity as high as N250 per litre in some locations in the country, even as government suggested open market price of N83 per liter.