Fuel: Govt bows to marketers as scarcity worsens

Fuel: Govt bows to marketers as scarcity worsens

THE biting fuel scarcity may have forced the Federal Government to eat the humble pie on it suspension of subsidy payments to fuel importers.

Under pressure to end the festering scarcity, the government has spoken of plans to involve members of the Major Oil Marketers’ Association of Nigeria (MOMAN) in the importation of refined petroleum products this quarter.

The government, through the Minister of State for Petroleum Resources, Dr. Emmanuel Ibe-Kachikwu, announced the suspension in January, a development that made fuel importation unattractive to marketers.

But, the ‘laudable’ decision turned costly for the government as the Nigerian National Petroleum Corporation (NNPC) which assumed the sole importation of petrol could not meet the consumption demand.

The minister had expected the marketers to complement government’s efforts, but he missed the point. They shunned importation since the stoppage of subsidies also ended their access to Foreign Exchange (forex) differentials.

Had the minister anticipated such reaction from the marketers and made a plan for a worst case scenario after the suspension of subsidy payment, the supply gap would not have degenerated to a national embarrassment.

The NNPC as the sole importer of fuel could not supply the more than 38 million-litre daily consumption requirement of Nigerians. But, the corporation lacked the power to compel the marketers to import fuel, especially with the excuse that they had challenges accessing forex from the Central Bank of Nigeria (CBN).

Besides, some saboteurs, who catch in on scarcity to undermine the system and make fortunes from black marketing of products have been at their best to ensure frustrate the fuel distribution chain.

So frustrated was the Minister of State that he once spoke of his inability to magically make fuel available at the filling stations. He gave a May deadline to end the lingering shortage.

Kachikwu’s “I am not a magician” comment stoked criticisms from Nigerians including the All Progressives Congress (APC) National Leader Asiwaju Bola Ahmed Tinubu, who chided the minister for offering to Nigerians an excuse reminiscent of the old administration.

The minister had explained that the present allocation has now become insufficient for the corporation that was using the same quantity when it was only supplying 50 per cent of the products. His comment was a request that the NNPC needed to redouble its crude oil allocation in order to meet the demand of the country.

But, the Federal Government moved at the weekend to tame the monster. It announced an approval by President Muhammadu Buhari for the allocation additional volume of crude oil to the NNPC to guarantee fuel supply.

Again, the cost modulation for the management of the petroleum products pricing review made overshot the subsiding margin last week as the Federal Government reviewed the prices for the second quarter.

The implication is that government would now subsidize the petrol by N5.84 per litre, although the Petroleum Products Pricing Regulatory Agency (PPPRA) retained the N86/litre for NNPC Mega Stations and affiliate stations and N86.50 per litre for other marketers.

The daily consumption of the product will determine how much government will pay as total subsidy but there is an assumption that Nigerians consume about 38 million litres of petrol daily.

In the new template released by the PPPRA on April 2, the Expected Open Market Price (EOMP) of petrol for other stations was N92.34 per litre, the gap of N5.84 per litre between this cost and the N86.50 per litre is known as the subsidy.

Since the EOMP for stations in this category was N91.80 per litre as against an official pump price of N86 per litre, the subsidy is N5.80 for NNPC affiliate stations,

Essentially, the EOMP is the actual cost of petrol without subsidy. It comprises of the landing cost of the product and its sub-total margins like transporters charge, administration fee, dealers cost and bridging fund among others.


Implications of subsidy



Prior to the reintroduction of fuel subsidy, the corporation had announced that government would be saving N100 billion annually by not subsidising fuel imported by marketers.

As an immediate remedy to the fuel shortage, the PPPRA also announced the importation allocation of 58.27 to oil marketing firms and 41.73 per cent to NNPC affiliate stations.

The target is wet all filling stations across the country with fule as soon as possible.

The NNPC however pointed out on Sunday  that companies  in the upstream oil and gas sector – International Oil Companies (IOC)  will provide forex for the importation of petrol into the country.

Its Group Executive Director/Chief Operations Officer, Downstream, Mr. Henry Ikem-Obih, made this disclosure after inspecting the sale of fuel in Abuja.

Ikem-Obih also informed that production of refined petrol will resume at three of the nation’s four refineries this month.

On measures to tackle the issue of forex for marketers to enable them participate in the importation of products in the  second quarter, the NNPC chief said: “As you know, forex was one of the prime reasons why we didn’t do well in the first quarter most marketers who had allocations could not import because they couldn’t access forex.

“The minister has worked very closely through his own initiatives with the upstream oil companies. So, we have a number of them onboard with us and they will support the local entities and downstream companies.

“They will help provide forex for the downstream companies to import and meet their PPPRA allocation. So, through the CBN, NNPC will support importation of fuel in the second quarter and the oil companies too will work with us. With this combined efforts, we hope we will be able to meet the import allocation for Q2.”

Speaking on the refineries, Ikem-Obih said: “Most of the work being done at the refineries are on site, that is, just getting them ready to start cracking crude so that they too can start contributing to the pool of the amount of fuel we have to distribute across Nigeria.

“We have to ensure that within the month of April that we have some local refining contributing to the amount of fuel we have to distribute across the country.

“The work will be across the three locations and they are all at various stages of start-up. And in terms of moving them to their optimal yield, there is a lot of work going on and we are hoping that within this month of April we will also have locally produced fuel as part of what people are buying at the pump.”

As part of the drive to ensure adequate fuel supply, the NNPC has received bids from nine oil firms interesting in building modular refineries within the premises of the existing national refineries.

The bidding, according to NNPC, was a demonstration government’s determination through the NNPC to increase the nation’s refining capacity from 445,000 barrels per day to 650,000.

Kachikwu, who doubles as NNPC’s Group Managing Director, has informed the modular refineries will come on stream to increase local refining capacity that in the next 12 to 24 months.

His words: “We are vigorously pursuing an improved model for ‘crude oil for refined product’ exchange (the Direct Sale – Direct Purchase arrangement) which eliminates inefficiencies with an attendant cost saving for the nation of about $1 billion. This will guarantee sustainable product supply to the nation.

“In the medium term, NNPC is working on sustainable strategies to permanently address the issues and challenges facing the midstream and downstream sectors. The over-arching objective is to make Nigeria a net exporter of Petroleum products as was the case in the 1970’s.

“Our commitment to ramp up our local refining capacity and availability remains un-waivered with the ongoing rehabilitation works targeted at running all Refineries at a minimum 70 per cent capacity utilisation within the next six to eight months.

“This is in addition to our initiative of increasing the combined capacity of the domestic refineries through co-locating smaller but cost efficient modular refineries within the existing refineries premises within a time frame of 12 to 24 months.

“To curb storage and logistics challenges, we are working on a joint partnership with technically and financially capable investors to ensure that petroleum products transportation and storage facilities are efficiently operated on an open-access common-carrier user-tariff basis.

“Some of these Depots will be nominated as strategic reserves while we take possession of a strategic reserve vessel in the next three months. Tangible results will be delivered within the next three to six months.”


The fears


Oil industry analysts believe the government may be taking a risk by approving that the marketers should supply higher volume of petrol. Their reservation is premised on the belief   that the marketers have been part of the sabotage that is holding down the downstream sub-sector.

But, the Vice President, Independent Petroleum Marketers of Nigeria (IPMAN), Alhaji Abubakar Dankingari, dismissed such fears. He stated that members of his association cannot work against national interest.

Responding on a telephone conversation, he told The Nation: “Yes, that is how the thing is supposed to be. If they give 58.27 per cent to marketers and NNPC supplies the balance, there will be availablity of products.”

Faulting claims that marketers are the saboteurs behind fuel scarcity, he said: “Let me speak for IPMAN? There is no how and IPMAN member will start doing anything against the government. It is not possible. This is because we are business people and we are very close to the people and the market. So the information is not true.”

The allegation that the marketers were sabotaging the fuel supply process emanated from a suspicion that many of the trucks divert fuel allocated to Lagos to other parts of the country where they sell above regulated pump price.

In Abuja at the weekend, a monitoring team led by the Director of the Department of Petroleum Resources (DPR), Mr. Mordecai Ladan, discovered how some petrol stations hoard products.

The Oando Petrol Station on Obafemi Awolowo Way, Jabi, beside Karimo Road flyover in the Federal Capital Territory (FCT) was ordered shut by the director for allegedly dispensing adulterated fuel to motorists.

The management of the station was insensitive to the plights of the motorists in the endless queues and refused to sell its 9,000 litres claiming that all the pumps were faulty.

But, the DPR enforcement stormed the station following a tip-off, caught the management of the petrol station unaware and wielded the big stick.

On arrival, the DPR team discovered that although the station had about 9,000 litres of fuel, it refused to sell to customers motorists who had queued up for the product all night.

Attendants at the station complained that their pumps were faulty and could easily pack up after dispensing product for a few minutes.

Following the inspection of the pump and the content available in the station, Ladan sealed up the station and said that “for this station, we have almost 9,000 litres on the ground but the pumps are not responding to drawing this fuel from the ground.

“That means that there is a problem. The problem is that adulteration is suspected. That is why we are calling on the public to withdraw from this station pending when we carry out our investigations. We have sealed it. It is going to be sealed, it is going to be quarantined until the necessary inspection and assessments done and we now know how to go from there.”

The saboteurs, according to sources, often collude with DPR and NNPC officials who have stakes in most of the petrol stations across the country.

A source said: “They feed the station managers with information on whatever plans the government has and how to circumvent it. For instance, while the DPR team was on its way out to monitor the fuel situation in some Abuja petrol stations, some members of staff had already allegedly sent out text messages to the station managers to readjust the pump prices to official the rates.

“Similarly, most of the security agents assigned by the Federal Government to enhance orderliness at the stations are there to pursue their personal interests. The Oando station that the DPR sealed last Friday did all its sharp practices with the protection of the policemen that were supposed to protect public interests.

“At a point, one of the armed mobile policemen was attempting to protect the manager from attending to the DPR team.

“With the insistence of Mr. Ahmed Alaku, an Asstistant Director, Operation, at the Abuja Zonal Office, the monitoring team was able to overcome the overzealous cops.

Also last Sunday, as some motorists queued up patiently at the NNPC mega station on Olusegun Obasanjo Way in Abuja, some irate youths aided some taxi drivers to jump the queue under the watch of policemen and Nigerian Security and Civil Defence Corps (NSCDC) personnel.

The Nation learnt Pipelines and Products Marketing Company (PPMC), allocates products to marketers for sale at the same official pump price in the hinterland, but that the shylock businessmen sell above the approved pump price.

[Source:- The Nation]