Marketers import product despite subsidy removal
TO close the gap created by the shutdown of Port Harcourt and Kaduna refineries, the Nigerian National Petroleum Corporation (NNPC) has embarked on a massive importation of Premium Motor Spirit (PMS). Also, major and independent petroleum marketers have continued to import PMS into the country despite the absence of subsidy in the 2016 budget.
The refineries were shut owing to crude supply challenges arising from recent attacks on vital oil pipelines. The Kaduna Refinery was already producing 3.2 million litres of petrol as at December last year and would have saved about $5.33 million for the country when it is 90 per cent operational. And the Port Harcourt refinery was recording a daily PMS yield of over 4.1 million litres before the attack on the pipelines.
NNPC has, therefore, been responsible for 78 per cent of the total fuel consumed in the country, while the major and independent marketers fill the remaining 22 per cent approved by the Petroleum Product Pricing and Regulatory Agency (PPPRA).
PPPRA had given NNPC 78 per cent of the allotment to import fuel while the private importers who hitherto shipped in over 60 per cent of the allocation are now left with about 22 per cent of the total allocation.
The fuel imports were approved for all the five major oil marketers and 15 independent marketers. The allocations to five members of Major Oil Marketers Association of Nigeria (MOMAN) were cut by about 70 per cent, while the NNPC allocation was jerked up from 40 to 78 per cent.
Contrary to expectations that the reduction in import allocation to private marketers of petroleum products and the breaches in Bonny-Okrika crude supply line to the Port Harcourt Refinery and the Escravos-Warri crude supply line to the Kaduna Refinery would lead to fuel scarcity in the country, an investigation showed that the product is available all over the country.
The Guardian’s checks revealed the availability of products all over the country though not being sold at the official price of N86.50k per litre as the price is higher in some states than the price approved by the Federal Government. It was learnt that though the Federal Government has approved a new petrol price, the average pump price is still well above N100 per litre.
Apart from Lagos and its environs where the product sells at the official price, a litre of fuel in Akwa Ibom, Imo, Anambra, Zamfara, Yobe, Kwara, Taraba and some other states is still as high as between N120 and N130.
Meanwhile, private petroleum product importers have continued to meet their 22 per cent allocation despite government’s silence on subsidy in 2016. Although they have always complained about the non-payment of subsidy arrears and difficulty in sourcing foreign exchange for fuel importation, an investigation by The Guardian revealed that the marketers have been importing fuel under the current circumstances.
Neither MOMAN nor Independent Petroleum Marketers (IPM) was willing to give reasons for the continued supply of PMS despite the uncertainty surrounding subsidy in 2016. But according to a marketer who spoke with The Guardian in confidence, they have to continue to import to be in business as they are still making profit under the new pricing regime.
According to the source, with the landing cost of PMS put at N59.35 as at February 8, 2016, ex-depot price, N76.50; expected open market price, N73.65 and the regulated price put at N86.50, marketers can survive without subsidy.
“We have made a case to the Federal Government to support IPMAN in mobilising our foreign partners in importing petroleum products at no cost or without subsidies payment to government. We have done all our mathematics that through our new model of crude oil swap arrangement, we can wet the country with petrol and kerosene and still gain from the transactions,” the source said.
The marketer noted that if the government removed the fuel subsidy and regulated the price at which the major oil dealers sold to other independent marketers, this would bring down the price of a litre of PMS.
“The first thing the government should do is to remove the subsidy on fuel, because the so-called subsidy is going into some private pockets. Then, it should regulate the price at which major petroleum dealers should sell the product to other independent marketers,” he said.
The Minister of State for Petroleum, Dr. Ibe Kachikwu, had affirmed government’s resolve to scrap oil subsidy because of an alleged fraud around it.
Kachikwu said the non-payment of subsidy would remain the same, as long as market trends allowed. The price modulation, according to the minister, is not an outright removal of petrol subsidy. He explained that a periodical review of the petroleum pricing template and a flexible management of the pricing system would be considered.
The price modulation, the government stressed, would be predicated on a N97 per litre projection, which would be a cap on the price of fuel with a gradual increase between the band of the current price of N87 and N97 until a fair price was reached in the pricing review.
There has been an argument whether government should continue to subsidise petrol in the country, with the organised labour insisting that government should continue to pay subsidy.
The President of the Trade Union Congress (TUC), Bobboi Kaiýgama, said since the price of crude oil in the international market had dropped drastically, there was the need for government to drastically reduce the price of fuel locally. He advocated a stakeholders’ meeting to discuss the subsidy and why it has become impossible to refine and purchase fuel at N50 per litre.
But the Manufacturers Association of Nigeria (MAN) described fuel subsidy, as a “major source of wastage of foreign exchange”, arguing that it would stop naturally with the privatisation of the oil and gas sector to promote emergence of private refineries.
The president of the association, Dr. Frank Udemba Jacobs, urged the government to revisit the issue of private refineries and carry out investigations into why those granted licences have not started operations.