As local refineries are yet to resume operation, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) yesterday gave the Federal Government the green light to remove subsidy on Premium Motor Spirit (PMS), popularly called petrol.

Its President, Festus Osifo, confirmed the position of the association while addressing reporters at the association’s National Executive Council (NEC) meeting in Abuja.

“Yes,” he said, when asked if PENGASSAN supported subsidy removal in the absence of operational local refineries.

“Today, there are few things that must be considered,” Osifo said.

The PENGASSAN president explained that since the crude oil, which constitutes about 90 per cent of the product cost is sold at international price, the difference between imported and locally produced petrol would be negligible.The union leader said PENGASSAN’s reason for requesting that local refineries be made functional is not necessarily for lower petrol prices but for job creation and deepening of the sector’s value chain.Osifo said: “Like I have said, how does this subsidy regime tie into other areas? The reason we are pushing for refineries to work is because of the fact that their working will create multifaceted jobs in the industry and it will deepen the value chain. That is actually why we are pushing for this.

“Today, if you look at the cost of importation of PMS and even the cost to produce locally – because the primary source is crude and that crude is sold at international price – the crude cost contributes over 80 per cent to 90 per cent of the overall PMS cost. So, it will not necessarily bring down the price.

“So, the reason we are agitating that the refineries should be working is practically because we want more jobs to be created and we want the value chain to be deepened.”

The union leader, who dismissed reports that petrol will hit N750 per litre, explained that such a calculation was based on the black market exchange rate.

He said since Nigerian National Petroleum Company Limited (NNPCL), which is the sole importer of petrol, uses official exchange rate, the product would sell in the neighborhood of N360 to N400 per litre.

Osifo added: “The N750 per litre is not also correct. I read what Independent Petroleum Marketers Association of Nigeria (IPMAN) released, saying about N750. If it is deregulated today, it is not correct because there was also a caveat. If you read it well; that if they get dollar from the Central Bank of Nigeria (CBN).

“Today, the sole importer of PMS into Nigeria is the NNPCL, and the NNPCL is using an exchange rate of CBN which gives about roughly N400 to N450, depending on the day and window you are looking at.

“So, if you compute that into the model today, PMS should be selling for about N360 to N400 or thereabout.”

The PENGASSAN president said the Federal Government has 20 per cent stake in Dangote Refinery, advising the government to buy more stakes in the entity to further guarantee the nation’s energy security.

He noted that with NNPCL in the saddle, the country cannot run short of petrol, even in a fully deregulated regime.

Osifo projected that the Dangote Refinery, which is already doing pre-commissioning, will start refining in June.

According to him, the private refineries, like Dangote, are reluctant to start production because of the lingering subsidy regime.

The PENGASSAN President emphasised the association’s aversion for outright sale of national refineries.

He admonished the government to adopt the Nigerian Liquefied Natural Gas (NLNG) model to shed the refinery’s shares to private investors.