Despite assurances by the federal government of steady availability of petrol, marketers have given indication of scarcity of the product in the coming weeks
They said they can no longer continue with the distribution of the product due to debt of N660 billion allegedly owed them by the government in addition to the scarcity of foreign exchange.
The marketers told LEADERSHIP Weekend yesterday that they were no longer comfortable with the lean margin after deducting operational and administrative costs associated with product sourcing and sale.
Chairman, Ejigbo chapter of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Alamu Ayo, stated that things are tough for marketers as they are not receiving supplies from the state oil company.
“The situation is going bad. I can say it anywhere; if the Nigerian National Petroleum Corporation (NNPC) claims they are giving fuel to marketers, they should specifically mention the names of the marketers.
“Ejigbo is the major supply facility to the rest of the Western zone, but since April 2016, the facility has been down till date; we are not functioning. NNPC is not giving us fuel and I challenge them on this.
Marketers source fuel on their own,” he said.
Ayo described the situation as precarious, adding that the little scarcity being experienced at the moment will escalate in the coming weeks.
Giving the background to the looming scarcity, he said, “At the moment, marketers buy fuel from depot owners at N137-N138 per litre, then add N3 per litre for transport and N1 a litre for loading logistics, bringing the cost to N142 per litre, and we sell at N145 per litre.”
He further explained that the margin from a truck after all expenses is about N50,000, adding that no marketer would like to do such business.
He warned that if government fails to address the rising cost of petrol sourcing, marketers will stop buying and distributing the product, which will ultimately lead to severe scarcity.
Our correspondents also gathered from industry sources that NipCo, the marketing arm of the Independent Petroleum Marketing Association of Nigeria (IPMAN), which had augmented product import, has suspended the business.
A top IPMAN member confirmed that NipCo was no longer receiving products from the NNPC like before, signalling a worrying scenario.
Meanwhile, the Depot and Petroleum Products Marketers Association (DAPPMA) has lamented the N660billion debt owed them by the federal government for imported fuel and interest on bank loans.
According to them, the said debt poses hindrance to petroleum importation in the country.
Its executive secretary, Mr Olufemi Adewole, who disclosed this in Lagos against the backdrop of long queues of trucks along Ijora-Apapa awaiting to load product at Dockyard and Apapa depot, said the debt has put marketers in a precarious situation.
Adewole noted that most marketers had stopped importing products due to their inability to access foreign exchang as well as government’s refusal to pay outstanding debts owed them.
He said marketers currently owe some Nigerian banks over $1billion, which they took as loans to import fuel, and that because the government has not paid them or paid the banks the interest on the loans as agreed, the interest has accumulated over time.
They pegged the main debt at over N500billion, while interest on loans is over N160billion.
The marketers have lamented that the inability to pay or service the loans has not only stalled further importation of fuel, but is threatening the operations of the affected banks and the nation’s financial industry in general.
Adewole continued: “Foreign exchange remains another big challenge; we don’t have forex to import the product, except we are able to get adequate forex. For now, the landing cost of petrol stands at over N145 due to high forex rate which poses a serious concern to marketers on the price to sell the product. Most marketers depend on NNPC-imported petrol cargoes. We buy from NNPC and our selling price depends on the price given to us”.
Also, the head of Energy, Ecobank Capital, Mr. Dolapo Oni, said he believed that something was happening behind the scene.
Commenting on the development recently, he said, “I believe there is a subsidy, but it is not the subsidy being paid to marketers; it is the NNPC taking a loss so that marketers can sell at N145.”
The factional president of IPMAN, Mr. Chinedu Okoronkwo, blamed the problem on the lack of forex.
He stated that a flexible way of assessing forex should have been provided for importers rather than allowing them to depend on the black market for the purpose of importing critical items to the country.
He said, “There are people who have the forex to bring product and sell. By so doing, forex will crash. But when the industry is over protected like ours, the current challenges will be unending. The market forcee should drive the price.”
On the way out, he said, “I will advise for total deregulation. The price moderation, which is the cap placed, is not healthy for the petroleum industry to grow.”
On his part, a renowned petroleum economist and president, Nigerian Association for Energy Economics (NAEE), Professor Wumi Iledare, blamed marketers for misunderstanding the intentions of government when it hiked the price of petrol in May.
He said, “The concept of fixing a price at N145 per litre introduced by government in May last year was actually supposed to be a ‘price ceiling’ and not ‘price floor’.”
According to him, petroleum marketers refused to allow the system work itself out but merrily took the product’s price from N87 per litre to N145 per litre, an action, he said, was uncalled for as it was not the intention of government then for premium motor spirit (PMS) to be sold at the floor price from the beginning.
He noted that the situation is complex as only the Petroleum Products Pricing and Regulatory Agency (PPPRA) could regulate the price, adding that, from all indications, the nation may not be far from another petroleum price hike even though NNPC is still denying it.
Meanwhile, it was learnt that the minister of petroleum resources, Dr Ibe Kachikwu, held a crucial meeting with key agencies of the ministry on Tuesday this week in his office to consider how to avoid the looming crisis in the downstream sector and how best to execute the plan.
The meeting, according to sources, was initially scheduled to hold at the office of the PPPRA but was moved to the Ministry of Petroleum Resources on the insistence of the minister who had indicated interest in participating in the discussion.
A source in the ministry, who confirmed the meeting but refused to give details of discussion to LEADERSHIP Weekend, said that the minister was only strategising with the relevant agencies to forestall a crisis in the sector.
He, however, confirmed that the minister was seriously concerned about the scarcity of petroleum products such as Dual Purpose Kerosene (DPK) and domestic gas across the country.
According to a source who attended the meeting, discussions centred on how best to tackle the situation as it was obvious that it would be impossible for the Nigerian NNPC to remain the sole importer of products.
LEADERSHIP Weekend recalls that the NNPC had recently confirmed that it had increased its importation from 30 per cent to 90 per cent of the nation’s petroleum product consumption, a situation which is contrary to the Corporation statutory position of importer of last resort.
This is even as independent marketers claim they are no longer able to import products due to outstanding subsidy debt owed them by government as well as inability to secure forex at the official market rate.
The PPPRA had, in May 2016, released a pricing template following the introduction of new price of petrol. It argued that the rise in crude oil price and prevailing high cost of importation necessitated the introduction of a new price band, putting the landing cost of the product at N122.03 and the total cost at N140.40.
According to the agency, production cost and flight rate, which are the elements most affected by crude oil price vis-a-vis exchange rate, brought the commodity’s price to $534 per metric tonne of petrol or N111.30 per litre, using an exchange rate of N280/dollar.
However, recent developments in the global market have brought the cost of petrol to $560 per metric tonne, or N127.36 per litre, while freight cost is N7 per litre.
The addition of the cost of the product, with freight charges and other cost elements in the PPPRA template resulted in a landing cost of N145.09 per litre (using the official exchange rate of N305/dollar) or N222.33 per litre (using the parallel market rate of N490/dollar).
But the NNPC has continued to sell the product to marketers at N131 per litre, indicating that the Corporation is subsidising the product. The situation has forced marketers to depend on it for supply since they are unable to import and sell at the prevailing market price.
Speaking to the LEADERSHIP Weekend yesterday, NNPC spokesman, Ndu Ughammadu, maintained that despite seeming challenges, the Corporation has a responsibility which it will continue to discharge diligently.