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MOMAN: FG Must Deregulate Downstream to Address Fuel Supply Challenges
•Don’t sell fuel above N165/litre, IPMAN, ADITOP warn members, appoint consultants to recover debts
•Nigeria’s problem is distribution, not supply, PENGASSAN declares
Emmanuel Addeh, Sunday Aborisade in Abuja, Emma Okonji, Nosa Alekhuogie and Peter Uzoho in Lagos
As petrol scarcity in Lagos, Abuja, and other cities persists, petroleum products marketers under the aegis of Major Oil Marketers Association of Nigeria (MOMAN) have said the most viable solution to the supply and distribution challenges is full deregulation of the downstream oil and gas sector.
The suggestion came as the Association of Distributors and Transporters of Petroleum Products (ADITOP) and the Independent Petroleum Marketers Association of Nigeria (IPMAN), yesterday, warned their members against selling petrol above the government approved price of N165 per litre.
The oil marketers made the remark a day after President Muhammadu Buhari said his government suspended the petrol subsidy removal because it was not in the country’s best interest. Buhari, who said this in an interview on Bloomberg, stressed that while removing subsidy looked good on paper, the human consequences could not be ignored. Although his administration was on the verge of removing petrol subsidy last year, Buhari said it became inadvisable after inputs from industry experts and other economic factors were considered. He said issues around petrol subsidy would be resolved through on-going efforts at boosting local refining, especially through private sector involvement.
Nevertheless, National President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Mr. Festus Osifo, yesterday, insisted that Nigeria had enough stock of petrol, despite the scarcity in various parts of the country. Osifo, who spoke on a national television programme, maintained that Nigeria’s major problem was with the distribution of petroleum products. He said the tanker drivers were not loading as much products as they should because of pending issues around the “bridging fund.”
Analysts had warned that the federal government’s inability to take the tough decision on the subsidy issue was bound to have massive consequences for the overall implementation of the Petroleum Industry Act (PIA). The implementation of the PIA, which requires the removal of petrol subsidy, ought to have commenced in February 2022, but it was shifted to July 2022.
However, due to pressure and threats of protests by the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC), the decision on subsidy removal was suspended to next year. There are concerns that due to political considerations, it might not be implemented till 2023.
But in a statement yesterday, MOMAN stressed that urgent and full implementation of the PIA 2021, as regards full deregulation of the downstream sector to allow market forces determine the prices of products, especially petrol, was the way out of the frequent product shortages and attendant hardships on Nigerians.
The MOMAN statement was issued in Lagos at the end of its virtual press conference, which was jointly signed by its Chairman, Mr. Olumide Adeosun, and Executive Secretary/Chief Executive Officer, Mr. Clement Isong.
“The full deregulation of the petroleum downstream sector and full implementation of the PIA 2021 clearly remains the most viable long-term solution to the country’s supply and distribution challenges,” it added.
The association also empathised with customers of its member companies, as it continued to grapple with recurrent scarcity of petrol in various parts of the country. It said the current scarcity of petrol was occasioned by two main reasons, namely, supply inadequacy in the last few weeks, and distribution challenges created by the unavailability and continuous surge in international prices of diesel.
MOMAN said its members were working with the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the Nigerian National Petroleum Company (NNPC) Limited through its marketing arm, the Petroleum Products Marketing Company (PPMC), the National Association of Road Transport Operators (NARTO), and other industry stakeholders to make petrol available at the pumps and eliminate the queues as quickly as possible.
The statement said, “MOMAN, as an association, fears that the current supply framework cannot guarantee steady and consistent supplies to the country, given the current state of government finances and unpredictable international supply shortages.
“We, therefore, recommend a gradual price deregulation with targeted palliatives (eg. transport and agricultural subsidies) to the public to ease implementation.
“However, in the interim, MOMAN recommends: the current single supplier strategy be reviewed; the Federal Ministry of Petroleum Resources, in collaboration with the Ministry of Finance and other relevant MDAs, should set up a taskforce to immediately focus on increasing diesel supply through accelerated initiatives to increase local modular refining capacity.”
The marketers’ union noted that the suggestions proffered would tackle the supply and distribution challenges, adding that the phased rehabilitation of existing NNPC refineries would hasten supply of middle distillates: diesel and aviation fuel.
The statement further said, “MOMAN recognises and closely associates with the need to ease challenges with respect to high energy and transportation costs occasioned by extraneous circumstances.
“MOMAN shall continually do its best to distribute petrol to its customers across the country and keep exploring opportunities to partner with industry stakeholders, the Authority, and the Government to ensure the sustainability and institutionalisation of a viable petroleum downstream sector in Nigeria.”
Don’t Sell Fuel Above N165/litre, IPMAN, ADITOP Warn Members
ADITOP and IPMAN warned their members against selling petrol above the government-approved price of N165 per litre. The bodies gave the warning in Abuja, following reports that IPMAN in Lagos State had directed their members to start selling fuel at N180 per litre.
IPMAN National President, Chinedu Okoronkwo, told journalists in Abuja that his members had earlier briefed him on why they wanted a price hike. Okoronkwo said the federal government had released enough fuel from its depot, which would enable them “to maintain the status quo antebellum”.
Okoronkwo also said the unions had engaged the services of Benham Group to recover money owed them for the supply of petroleum products. He expressed the hope that the partnership would help in ending fuel scarcity at the filling station.
Okoronkwo said, “Our business requires technology, that is why we brought a seasoned financial expert and we’ve been able to recover a lot of funds in other countries and Nigeria.
“The incessant mishaps and destruction of trucks on the road, banditry and kidnapping is the reason we are bringing the insurance company to help us.
“Leaving the risk for the owner of the truck to bear will affect our businesses.”
Okoronkwo maintained that petrol must be sold at N165 per litre since the federal government had released fuel from the depot.
He said, “Our members in Lagos were getting the fuel at N170 -N173 that’s why they wanted price increased.
“It’s only the Nigerian National Petroleum Company that is importing the product.
“The cost of doing business had changed, so it becomes difficult to sell at N165 per litre.
“That is why we are thanking the NNPC for bringing the product to N143. So, our members must sell the product at N165, which is the government-approved price.”
National President, Association of Distributors and Transporters of Petroleum Products in Nigeria (ADITOP), Alhaji Mohammed Danzaki, also said Nigerians had suffered a lot from fuel scarcity because of the problems the association faced.
Danzaki said, “ADITOP and IPMAN are the ones suffering, since we need return for our investment.
“NNPC has done a lot to import the product but the main issue is the transportation. We have not been getting our payments. That’s why we engaged a financial expert, Benham Group, to recoup our money for Nigerians to get regular supplies in the fuel stations.”
The chief consultant and chairman of Benham Group, Dr. Maurice Ibe, said the collaboration was to ensure stabilisation of fuel supply at the filling stations.
Ibe said they were doing everything in their powers to stabilise activities in the downstream sector and ensure that products were transported to every nook and cranny of the country.
He said the fuel scarcity was affecting the country’s economy.
According to him, “You can’t hold a businessman’s money and expect the business to flourish. So, rescue our members so that they can function very well.”
In a related development, IPMAN proposed dialogue between government and oil marketers in an effort to solve the recurrent fuel scarcity.
National Operations Controller, IPMAN, Mike Osatuyi, said the fuel scarcity would continue if the government failed to consider dialogue as a key solution.
According to him, a meeting with the government, stakeholders, and security agents is needed to settle the crucial issues.
Osatuyi, who spoke yesterday on Arise News Channel, the broadcast arm of THISDAY Newspapers, lamented the reoccurring queues at petrol stations. He advised that meetings should be held bi-quarterly to review situation, even when products sold at the official price, instead of waiting till there was a problem.
He stated, “Once you don’t give us the product and we buy from a third party, then there is no way things can go right. We need to go back to the drawing board, revise the template, and put all cards on the table.
“If it involves increasing the pump price officially, why not, if the figures are right.”
Osatuyi further explained that in Nigeria, half a billion naira of subsidy every month was incurred, when gotten at the Central Bank of Nigeria (CBN) rate of about N420 per litre.
He said, “They should call a meeting to discuss and solve the problem at once. I believe there’s no problem that doesn’t have a solution. There’s no point going back and forth and we can’t keep pretending things are okay because they are not.
“You can have three million litres of fuel in your reserve but are you giving it to the right people at the right time and at the official price? The answer is no. So having these conversations everyday is not fair on Nigerians.”
Osatuyi, however, admitted that little was being done in terms of production, saying it does not go round. But he expressed optimism that at the commencement of production in the first quarter of next year, there would be enough fuel in the country.
Nigeria’s Problem is Distribution, Not Supply, Says PENGASSAN
National President of PENGASSAN, Mr. Festus Osifo, said yesterday that there was enough stock of petrol in Nigeria, despite the scarcity in various parts of the country. Osifo spoke on a national television programme.
He maintained that Nigeria had a distribution problem, since the tanker drivers were not loading as much as they should because of unresolved issues around the “bridging fund.”
In addition, the PENGASSAN leader stated that private depots were selling their products above the N148 official ex-depot price because of some inbuilt logistics, making it impossible for retailers to sell at the official N165 per litre.
Osifo stated, “The ex-depot price of this product is N148 as of today and there are some costs that are built into it. And one of the costs is the bridging fund, which NNPC would collect and remit to the NMDPRA.
“So now at a particular time, they agreed with the truck drivers that bridging fund will be N10 per litre, depending on the destination you are going all over the country. At the time they agreed, the cost of diesel was about N250.
“But today the cost of diesel is over N700, it has tripled. So the expectation from the tanker drivers is that since the cost of diesel has gone up, instead of paying N10 you have to multiply by three.”
Osifo stressed that the tanker drivers were not charity organisations, but were in business to make money, saying that even though Nigeria has close to two billion litres available in terms of petrol stock, it has been difficult getting the fuel to the filling stations.
“So the problem is not the stock, we have the stock all over depots. The truck drivers, most of them are not willing to lift this product,” he added.
NNPC is the sole importer of petrol.
Osifo stated that while it was possible for the national oil firm to sell at N148 at NNPC depots, private depots could not sell at the same price to retailers because of extra costs they bore to take the products to their depots.
He explained, “So they sell at a premium. And at the end of the day, they sell between N150 to N160. In some cases, they sell at N162 and if they sell at that amount, it will now be difficult for the retailer to go and sell about N165.
“This is because you cannot buy products at up to N163, then pay some other transportation costs, plus your cost of operation and you are being asked to sell for N165.”
For this reason, he explained, some retailers had declined to buy the products, leading to many petrol stations being closed for not having supply.
Osifo added that Lagos had been free from supply issues before now because until recently, the retailers were okay with how much they were getting the product and selling to retailers.
But he said, “There’s problem along the distribution line.”
To resolve the problem, Osifo insisted that the federal government must define the short, medium and long-term approach to tackling it.
In the short term, he stated that there were already on-going discussions between the government and the tanker drivers, with a deal in sight to increase the bridging fund from about N10.4 to over N20.
He said, “So if they do that, although the tanker drivers are still pushing to add something to that, what is going to happen is that drivers will start loading and once they start loading, you are going to have petrol all over the country.”
Osifo also urged the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to visit the private depot owners and discuss with them with a view to enforcing and implementing the approved price regime.
In the long term, Osifo maintained that Nigeria must begin to refine its products in-country, which had been the yearning of the trade unions. He said the cost of fuel was generally higher in countries that did not produce or refine their products.
He said if subsidy were removed today, Nigerians would be buying petrol for between N400 to N500, stressing that while the subsidy is meant to pay for the difference between the price it is imported and when it gets to the depots, it doesn’t necessarily take care of bridging costs.
Osifo stated, “You remember when the subsidy of N4 trillion was agreed and when the calculation was done, the landing cost was around N300 to N350. It wasn’t what it is today. So now there is more pressure. If we go by the data we have today, I can tell you that we will not be spending N4 trillion; we may be spending upwards of about N4.5 to N5 trillion in subsidy.
“So the major bulk of that subsidy goes to ameliorate or to cater for the difference between the amount of money that the PMS is bought in to the amount of money that NNPC supplies to the retailers.”