petrol

… retains subsidy over fear of labour strike, civil unrest

 

|      By AYOOLA OLAOLUWA       |

 

With the continued rally of crude oil prices in the international market, soaring to their highest in about 14 months on Friday, March 5, 2021, the Federal Government is in a dilemma on whether to authorise another fuel pump price increase or retain the official pump price band of N160/N163.

The government, it would be recalled, had stopped the payment of fuel subsidy in 2020 owing to several factors, including the steep drop in foreign exchange earnings and internal revenues,  as a result of plunges in oil prices and effects of Covid19 pandemic which slowed down economic activities.

The Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Malam Mele Kyari, on April 7, 2020, announced that the era of subsidy on petrol is gone forever in the country after bowing to pressure from international lending agencies the World Bank and the International Monetary Fund (IMF).

According to Kyari, the current fluctuations in global crude oil prices, the cost of refined products would be determined by market forces going forward.

“There is no fuel subsidy anymore in Nigeria. It is zero subsidy forever, going forward there will be no resort to either subsidy or under-recovery of any nature,” he said.

“There would be no resort to either fuel subsidy or under-recovery of any nature. NNPC will play in the petroleum marketplace, just like another marketer in the space.

“But we will be there for the federal government would no longer be paying for under-recovery or subsidy on petrol owing to the development in the global oil sector”, the NNPC boss had stated.

The Buhari government subsequently embarked on a price increase spree and then total withdrawal of fuel subsidy. In May 2016, exactly a year after assuming office, the current administration raised the pump price of a litre of petrol from N87 per litre that it met to N121.50. Since then, petrol price has increased by about five times. It rose from N121.50 – N123.50 per litre in June 2020, N140.80-N143.80 in July 2020, N148-N150 in August and N160-N162 in November 2020.

Seemingly undaunted by the  outcry that greeted the last increment, the Mnister of State for Petroleum Resources, Timipre Sylva, had said that the federal government was no longer fixing the pump price of petroleum products in the country.

“Government is no longer in the business of fixing prices for petroleum products, we have stepped back. Our focus now is on protecting the interest of the consumers and making sure that marketers are not profiteering.

The minister said it was unfortunate that people were blaming government, noting that the deregulation of the sector was imperative for the economy. He said that it was also a consensus among stakeholders for such strong policy direction.

However, while talking tough is cheap, there is a wide gag between the cup and the lip when it comes to walking the talk. Investigation by Business Hallmark revealed that the government is in a quandary on whether to further increase the current pump price of petrol or incur the wrath of the already restless millions of Nigerians and labour unions.

A top official in the ministry of petroleum told our correspondent that the government is cash-strapped and is not in a position to continue paying subsidy on petroleum products.

“Though, government is insisting that the era of subsidy is gone, I can tell you that that is far from the actual truth. In February, the NNPC expended N11.5 billion weekly on subsidizing petrol. That is N43bn in just one month. March figures will be higher as crude oil prices are nearing the $60 per barrel mark. Can you imagine what that amount can do? You can use three months subsidy bill to complete the Lagos-Ibadan Expressway”, he said.

Other figures, ranging from N52bn to N65billion have also be bandied as the real amount government spends monthly on fuel subsidy.

As at 1:10pm on Friday, March 5, WTI sold for $65.45, Brent, which Nigeria’s blends are benchmarked, sold for $68.58 and OPEC Basket $62.15.

And as the price of crude oil in the international market continues to rise, the landing cost of of a litre of petrol in the country continues to go up. On February 23, the landing cost of PMS Premium Motor Spirit imported into the country climbed to N186.33 per litre, making the current pump price of N160/N263 untenable, opponents of fuel subsidy insist.

However, the landing cost of the product had further gone up. A source in the NNPC told BH  that based on the cargoes that landed at the Atlas Cove on March 1, the landing cost of a litre of PMS is N205.

“If you can recall, the CBN Governor, Godwin Emefiele, on February 27, announced that the naira has depreciated at the official market to N410 against the dollar.

“What this means is that the price of PMS will naturally go up owing to the crash of the naira. Before the new rate of N410 came into being, the NNPC was importing fuel at the official rate of N375/ N385. That is N35/N25 difference. So, who bears the cost? It is either the federal government bear the cost by ordering the CBN to sell dollar to the NNPC at the old rate, or allow the NNPC to use the Forex at his disposal to do that. Either way, someone is paying for the new landing cost as the pump price of petrol is still officially N160-N163

“Meanwhile, the Petroleum Products Pricing Regulatory Agency (PPPRA) permits marketers to add their margin of around N19 (depot owners N4, retailers N6 and the Petroleum Equalisation Fund N9) on every litre.

“If you add N205, being the landing cost of fuel to N19, that will give you N224. That should actually be the actual pump price of a litre of petrol”, said the official.

While the government is busy dilly-dallying on how to increase the pump price of petrol without incurring the anger the Nigerian and labour unions, marketers in the downstream sector who deal with investment uncertainty, have maintained that the global price of crude should naturally reflect in the retail price of the petroleum products in the country. They also demanded that the downstream petroleum sector should be liberalised, while calling on the NNPC to end its control and monopoly of imports.

While the federal government had assured Nigerians that it would not adjust pump prices upward in March, marketers have embarked on different strategies to force the hands of government.

BH findings revealed that apart from refusing to lift oil from depot owners,  marketers, particularly independent marketers across states, have adjusted upward their pump prices, leading to long fuel queues across the nation.

The Vice President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Abubakar Shettima, said members of the association are buying at an ex-depot price of N167, up from N158 they got it last week.

“Already, our members have closed down a lot of their stations due to the unavailability of fuel and the insistence of the NNPC that we should not sell above the approved rate of N163. Already, the DPR had arrested many of our members for selling above the approved rate.

“But how is that possible when we are getting fuel from depot owners at the rate of N167? Rather than get caught in the web, we will rather not lift fuel”, Shettima stated.

Coroborating Shettima, the National Operation Controller, IPMAN, Mr Mike Osatuyi, noted that members of his association were forced to increase the pump price because they bought the product at N160-N161 from depot owners.

“IPMAN members are buying from DAPPMAN at N160-N161, and they will have to add their transportation costs to it. So, at what price do you want them to sell? Even that N170 is still very cheap,” Osatuyi argued.

Checks revealed that fuel scarcity been experienced in many parts of the country may worsen as IPMAN members are finding it difficult to purchase fuel from the NNPC, while most private depots have almost run out of stock.

An official of an oil marketing company in Amuwo-Odofin in Lagos, while absolving farm owners of blame, said hat there had been erratic supply of petrol to private depots in the state for several weeks now.

Most filling stations monitored by our correspondent on the Lagos-Ibadan (outbound) had long queues with most selling above the official pump price. For instance, Fatgbems Oil was selling a litre for N172 on Thursday, while Enyo, just before the Kara Bridge, was selling for N170. Also, Matrix Filling Station, situated on the other side of the Lagos Ibadan Expressway (inbound) was selling for N169.

Meanwhile, all the filling station on the Berger/Ojodu Road that had fuel were selling fuel to motorists at the official rates. While the two NNPC outlets on the road (Omole and before FRSC Ojodu office) sold to motorists at the rate of N160, Oando, close to Ojodu Bus-Stop was dispensing at N162. However, the queues in the stations were long. Many of the stations on the road did not opened for business.

The trend was observed in filling stations in Agege, Ogba, Abule-Egba, Oko-Oba and Ile-Epo. While outlets owned by major marketers like Mobil, Oando, Conoil and Total sold fuel at the official rate, private filling stations were seen selling fuel for between N167 and N170.

The situation, BH gathered, is worse in cities and states like Abuja, Rivers, Oyo, Abia, Ondo, with the 19 northern states the hardest hit.

A member of IPMAN, Alhaji Supo Agunbiade, revealed that many marketers who paid for products at NNPC and private depots could not even take delivery of the products.

“Nigerians should brace for tougher days as fuel scarcity will worsen. Already, Nigerians now but fuel for between N170 and N400. Most Lagosians think nothing is happening. But they should go outside Lagos to see what others are experiencing. The luck they have is that a large portions of the fuel farms/depots in the country, in fact more than 80%, are sited in Lagos. So, there is a semblance of stability in the state.

“But just go outside the state, say Ogun, and you will understand what I am saying. Apart from Lagos, and maybe some major filling stations in Abuja, you can not get fuel at the official rate of N160/N163”, he said.

Also speaking, the Chairman, IPMAN, Ore Depot, Mr Shina Amoo, said members of the association could no longer get products due to a new payment method introduced by the Petroleum Products Marketing Company (PPMC), a subsidiary of the NNPC.

Amoo said since the new payment method, called ‘PPMC Customer Express’, was foisted on them by the NNPC, only major marketers and very few independent marketers with huge funds could pay for 200 trucks and load them while those who had paid for one or two trucks would be on queue for many months unattended to.

“The new payment requires various prerequisite documents like renewal of bulk purchase, renewal of licence and several other documents that are not readily available. Within few days of this new payment method, some northern big marketers have used the situation to shortchange independent marketers in the South-West. With this, fuel scarcity is imminent.

“PPMC Customer Express mode of payment was introduced without consideration for billions of naira worth of tickets which IPMAN members already tied down in NNPC system.

“Since the new payment method was introduced by the PPMC on February 4, no independent marketer had been able to load. They must return to the old way of payment, which is also an online payment through Remita”, he said.

Meanwhile, the NNPC has assured Nigerians that there will be no increase in the pump price of petrol in the month of March.

In a statement by its Group General Manager, Group Public Affairs Division, Dr. Kennie Obateru, the corporation said contrary to speculations of imminent increase in the price of PMS in the country, it was not considering any increment in the ex-depot price of petrol in March, 2021.

He cautioned petroleum products marketers not to engage in arbitrary price increase or hoarding of petrol in order not to create artificial scarcity and unnecessary hardship for Nigerians, assuring that it has enough stock of petrol to keep the nation well supplied for over 40 days and urged motorists to avoid panic buying.

“We have 1.7 billion litres of product as at today, which will give us about 40 days’ sufficiency. Even some more vessels are on the programme.

“And we have not increased our ex-depot price; even though we know some of them (marketers) are sort of slowing down because they are expecting that we will react to the crude oil price increase. But for now, we haven’t done that,” he assured.