The Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), Mr. Mele Kyari, has given reasons why the company didn’t go bankrupt in the face of growing financial obligations occasioned by rising fuel subsidy.
Kyari dropped the hint during a media briefing addressed by the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun in Abuja at the weekend.
Kyari said that President Bola Tinubu’s, announcement during his inaugural address on May 29 was a game changer for NNPCL.
Prior to the announcement, Kyari said NNPC was being saddled with the payment of a monthly subsidy bill of about N400 billion which it was struggling to cope with and subsequently couldn’t afford anymore.
Kyari said NNPC was at the point of default when President Bola Tinubu took over on May 29, 2023.
He said the national oil company “was facing imminent illiquidity”.
“This is because we kept carrying the subsidy burden, the federation, that is all the sub-nationals and Federal Government, are unable to pay their bills for the subsidy,” The NNPCL boss said.
“That means NNPC was carrying the subsidy burden for the whole federation until it became very obvious by the time Mr. President took over that it is no longer possible to proceed because you do not have the cash to pay for it and NNPC could potentially go into negative cash flow. Another word for it is bankruptcy.
“And it was impossible to continue. So it wasn’t really a matter of even preparedness. As the minister has said, it was no longer sustainable, that you cannot do what you cannot afford.
“You do not have and at that point in time, the subsidy burden was about N400 billion every month. And if the situation has continued, I can tell you in today’s market condition, pricing in the market and also the FX regime, we would have been dealing with close to N1 trillion of subsidy every month at this point in time.
“We simply don’t have those resources anymore. You are not just saving money, you are also passing realities around what you can’t afford. And as a result of that change, we saw demand go down by 30 percent,” he said. This, he said, also means a 30 percent reduction in foreign exchange requirements.
Meanwhile, the NNPCL GCEO also disclosed that the nation’s fuel demand has declined by 30 percent since Tinubu announced the removal of fuel subsidies in May.
According to Kyari, the fall in fuel demand from approximately 66.7 million litres daily prior to the removal of subsidy to approximately 46 million today means a 30 per cent reduction in NNPCL’s demand for foreign exchange to import fuel. He also reported that oil output had increased to 1.6 million barrels by Wednesday, August 30, from less than one million few months ago.
“This is substantial – if you look at the situation where we are almost going below a million barrels a year some months ago,”.
He said the oil and gas industry has a huge potential and the possibilities of providing all the foreign exchange (FX) requirements of the country.
“But you cannot do this except you are able to produce and also take it to the market, because we did have substantial challenges of security, which I also confirm this moment that Mr. President has re-engineered the security approach and we are already seeing very significant changes in our production environment,” he said.