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Energy Crisis: Oil marketers lament NNPCL’s monopoly on products import with Forex access 

*Nigerian oil marketers kick over their inability to import petroleum products as the NNPC Limited continues to maintain monopoly with Foreign Exchange access in the economy, with the ‘partially re-introduced’ average subsidy on every litre estimated at about N200 per litre, N10.6 billion daily, and N318 billion monthly respectively

Isola Moses | ConsumerConnect

The controversial fuel subsidy may have returned to the downstream sector under another guise as the Federal Government now leverages the Nigerian  NNPC to manage market shocks with about N318 billion subsidy monthly, says report.

The Nigerian Government reportedly manages the market shocks and maintain monopoly of the downstream segment of the West African country’s oil and gas industry.

Malam Mele Kyari, Group CEO of NNPC Limited 

President Bola Ahmed Tinubu in his inaugural address May 29, 2023, had announced to Nigerians the “the subsidy is gone.”

ConsumerConnect learnt the fuel marketers, however, had lamented their inability to import petroleum products as the NNPCL (the Company) now maintains monopoly with Foreign Exchange (Forex) access in the economy.

Analysis indicated that about N318 billion (N10.6 billion) monthly losses are now recorded on the Premium Motor Spirit (PMS), otherwise known as petrol, and may be calculated as under-recovery by the supposed NNPC Limited, The Guardian report said.

A similar development was said to have played out under the administration of former  President Muhammadu Buhari, where the Federal Government “secretly” returned subsidy, and described it under-recovery in NNPC’s books.

It is also noted that the country’s Federation Account suffers it, in that such fund is usually deducted before NNPCL makes any remittance into the account meant for the three tiers of government as allocations.

More so, barely weeks after President Tinubu said there would no longer be increase in pump price of PMS and days after NNPC’s Huub Stokman took over as Chairman of the Major Oil Marketers Association of Nigeria (MOMAN), some marketers disclosed the state oil firm is now subsidising through its access to Forex, according to report.

Anxiety over increasing petrol pump price for consumers

In mid-August this year, the President was quoted to have stressed despite the deregulation of the downstream market in Nigeria, the current petrol price would remain unchanged, as there are no immediate plans to raise fuel prices.

Source, nonetheless, indicated that as of the last week of August, PMS traded for $1,030.11 per metric tonne in the international market, compared with the $859.25 it traded around July when the NNPCL increased pump price to an average of N617 per litre for fuel consumers, with an increase of 19.88 percent.

The exchange rate July was N820/US$ but currently about N920/$, indicating a 12.19 percent increase.

The crude oil price in July was $78.50 per barrel, it traded for $88.50 per barrel in the last week of August, and it hit the $90 mark this week.

Besides, as the price per litre in the international oil market July was $0.641, it stood at $0.792 in the last week of August.

This means that the landing cost of PMS stands at about N728.64 per litre compared to the N529 it was July 2023.

The addition of freight costs, lightering costs (STS), distribution margin, ancillary costs by Nigerian Midstream Downstream Regulatory Authority (NMDPRA), Nigerian Port Authority (NPA) and Nigerian Maritime Administration and Safety Agency (NIMASA) as well as marketers’ margin stands at about N90 to N105.

By implication, the pump price of PMS should hover between N818 and N833 per litre, depending on a consumer’s city of residence in the country. With these developments, the average subsidy on every litre is about N200 per litre.

This is about N10.6 billion daily and N318 billion monthly.

Comparative oil prices in selected African countries

As of September 5, 2023, the pump price of PMS in Cameroon is N1,082.70 per litre, in Benin, it was N1,008.90, in Sierra Leone, it stood at N1,143, N1,037 in Togo, N1,047 in Ghana and N1,258.20 in Guinea.

When the current pump price is compared with other deregulated products in the country, diesel and kerosene are selling between N800 and N900 per litre.

“The price of kerosene/jet fuel in the international market as of August was $1,036.60 per metric tonne, which was almost the same as PMS.

Diesel in the international level traded lower during the period at $952.85 per metric tonne.

MOMAN, which had regularly provided a pricing update, had suspended it.

A source at the organisation reportedly said there was an instruction to not share the update because the government has stated there would be no price increase.

Although the exchange rate at the NAFEX window traded for N769.93 Monday, September 4, several marketers said they were unable to source Foreign Exchange from the window, and as such could not import despite obtaining licences from the Nigerian Midstream Downstream Regulatory Authority (NMDPRA).

Speaking on the development, a top marketer reportedly said: “NNPC unofficially, has been told to subsidise PMS through exchange rates. They are getting dollars from crude oil sales.

“It is their money; they can decide to do with the exchange rate at N1 to $1 or N915 to $1, whatever they do, it is in their books, they aren’t looking for Forex anywhere.

“But we marketers have to go out and look for Forex, and it is this Forex that is impacting what we sell.”

The oil dealer also disclosed if the situation persists, most Nigerian oil marketers would be out of business in no time.

Benneth Korie, National President, Natural Oil and Gas Suppliers Association of Nigeria (NOGASA), who had decried the prevailing development in the sector said: “We are suffering too much. We are losing money on a daily basis.

“That is what we do. We borrowed money from the banks and some of us cannot pay again.

“We are in trouble. There is a need for the government to come into this matter urgently, otherwise we will have a problem.”

Korie also noted: “Definitely, the price of PMS will go up as much as the dollar price goes up. If you are exchanging $1 for N950, it will go up.”

Against the provisions of the Petroleum Industry Act (PIA), Nigeria needs an estimated $15 billion to import almost 100 per cent of its PMS demand in a year as the local refineries are dormant.

Any energy transition plan before petrol subsidy removal in Nigeria?

While marketers had raised concerns that there was no transition plan in place before subsidy was removed, some of them predicted the current situation where Foreign Exchange crisis would humble the much-trumpeted deregulation of the downstream sector in the economy.

Tunji Oyebanji, former Chairman of the Oil Marketers Association of Nigeria (MOMAN), had earlier warned proper approach to the subsidy removal was sacrosanct.

Oyebanji was quoted to have stated: “We are saying that there has to be a very clear roadmap so that all stakeholders can be carried along. For me, this is very critical.

“For example, at the point we will remove subsidies, will other products be imported? We can’t wait until the day subsidy will be removed before we know.

“If they are importing, we need to have placed an order.

“If NNPC will be importing, we need to know. Everyone needs to be on the same page.”

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