By: Nghiinomenwa Erastus
Due to under-recovery, the government has spent almost a billion (N$929,7 million) on subsidising local fuel prices from January to November 2021.
According to the information collected by The Villager from the ministry and their monthly fuel statements, the seven monthly fuel road delivery subsidies amount to N$977, 5 million.
All this is spent while the country’s 75 million-litre National Oil Storage Facility, built to cushion the domestic prices and consumers from international oil price volatility, is nowhere to be found.
The ministry early this year told The Villager that the oil storage facility has assisted in maintaining the stability of the fuel price in a very volatile market.
“As a whole, we have been extremely robust in our ability to manage external shocks in terms of market price and price stability,” the ministry said early this year.
However, the government has only subsidised the fuel price through the National Energy Fund, while taxpayers collectively are footing the bill of N$6,5 billion used to build the facility.
The money was borrowed from the Development Bank Namibia.
The facility does not seem like it is done, as the latest update from the procurement board has indicated that the government plans to fork out an additional N$87 million for the incomplete work on the facility.
According to the government promise through the mining ministry and Namcor, the storage will ensure supply for the entire country. The National Oil Storage Facility consists of seven tanks that hold a combined 75 million litres.
The NOSF was designed and constructed as a Strategic Storage Facility to increase Namibia’s fuel supply security from the previous 7-10 days to 30-45 days in situations where the country could not import petroleum products from the international market.
Despite this promise and storage completion handed over to Namcor, the country has been experiencing under-recovery in fuel prices from January to November this year.
Under-recovery means the pump price set by the government domestically is less than the price as dictated by the market forces on the international markets.
As a result, the National Energy Fund (NEF) has been paying for the price difference, or else the government passes it on to the consumer every month.
NEF paid N$977,5 million for the past 11 months to cushion consumers against volatility in the international fuel prices despite investment into the fuel storage.
If NEF doesn’t cover under-recovery, the mines ministry will pass on the burden to the consumer through price hikes- like the one experienced today.
The government has shifted the burden to the consumer eight times through fuel price hikes from January to date.
The pump price going up or down is dependent on the price in the international market from which it is sourced.
However, the increased storage capacity will ensure that the fluctuations every month (whether up or down) are not extreme but rather gradual and implemented in a manageable and reasonable manner under the circumstances.
According to the ministry explanation early this year.
