…FG insisting on current petrol price means subsidy is back – Marketers

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…say subsidy inevitable to maintain current pump price at N568-N617

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Despite announcing the removal of subsidy on petrol and more than 400 per cent subsequent rise in the price, the Federal Government may be secretly paying an unspecified amount to marketers of the product to maintain the current pump price.

President Bola Tinubu had during his inaugural speech on Monday, May 29, 2023, announced that the era of subsidy payment on Premium Motor Spirit, otherwise known as petrol, was over. This announcement led to an instant rise in the pump price of the commodity from N189 to about N500.

Presently, petrol sells for between N568 and N617 in different parts of the country due to what government officials and the NNPC Limited described as foreign exchange fluctuations as the product is exclusively being imported.

Saturday PUNCH gathered that the ex-depot price of petrol stood at N580 per litre in Lagos on Thursday and that after adding the cost of conveying it to filling stations and the marketers’ profit margin, it ought to sell for between N620 and N630 per litre. The difference, however, represents the subsidy that the government is surreptitiously bearing despite the fact that there is no budget for that.

It was learnt that jolted by the negative reactions that had been trailing its economic policies, including the astronomical surge in the cost of living occasioned by the removal of fuel subsidy and the floating of the naira, coupled with a possible backlash if the pump price of petrol rose further, the Tinubu administration decided to peg the price at the current rates and instead opted to accommodate some form of subsidy.

“Our ex-depot price as of Monday was N575 and by Thursday, it had jumped to N580. Ideally, we should be selling above N600, say N620 per litre in Lagos, but the Federal Government is saying we can’t increase the pump price, so who pays the differential?
“The business is no longer profitable and that is why a lot of independent marketers are abandoning their filling stations and selling them to major marketers, which have the resources to absorb some of the unexpected volatility.

“Before subsidy removal, it used to cost a tanker about N5m to lift petrol from the depot, but now, the price has jumped to about N25m and the profit margin on that is just around N300,000. So, it is not an encouraging business at the moment.”
The marketers had said on Sunday that the price would rise to between N680/litre and N720/litre in the coming weeks should the dollar continue to trade at N950 in the parallel market.

They also hinted that dealers seeking to import PMS were being forced to put the plans on hold due to the scarcity of foreign exchange to import the commodity.

The warning came barely one week after the local currency crossed the N900/dollar ceiling, with the naira selling at over 945/dollar at the parallel market last Friday.

Oil dealers said the Central Bank of Nigeria’s Importers and Exporters official window for foreign exchange had remained illiquid and unable to provide the $25m to $30m required for the importation of PMS by dealers.

The marketers had in June projected that the pump price of petrol could rise above N700 per litre in the northern part of the country starting from July.

National Controller Operations, Independent Petroleum Marketers Association of Nigeria, Mike Osatuyi, had told The PUNCH that the price could rise to above N700 in the North once independent marketers started importing products.

He said while those living in the northern states could pay as much as N700 and above for one litre of petrol, those outside Lagos should expect to pay around N610, while Lagos residents would pay about N600 per litre.

“What I am seeing is around N600 and above, depending on the exchange rate, the current crude price at the international market and the landing cost. Those in Lagos will pay around N600, those outside Lagos around N600 plus, while those in the North will be paying anything from N700 and above,” he said.

Similarly, a former Chairman of the Major Oil Marketers Association of Nigeria and Chief Executive Officer/Chairman of 11 Plc, Tunji Oyebanji, said consumers should expect new pump prices close to that of diesel, and those of neighbouring African countries that also import petrol.

By coming out to declare that the pump price of petrol will not rise above the N617/litre approved cost, the Federal Government has indirectly reinstated fuel subsidy, oil marketers stated on Friday.

Dealers of the commodity also asked the Federal Government to come out clean with respect to fuel subsidy, instead of mandating oil marketers not to dispense the product above a stipulated band.

“Therefore, they will now say to marketers, don’t sell more than this price, which means they have reinstated fuel subsidy and will now send the Nigerian Midstream and Downstream Petroleum Regulatory Authority to monitor prices at filling stations.”

Commenting on the $3bn recently loan secured by NNPCL from Afrexim Bank, Kekeocha said, “If you bring forex and make it cheaper and bring products and now fix the price, it means you are going to monitor marketers, because you are going to make retailers to sell within a price band.

“Anybody who sells above it means he is going against the law; this is a reinstatement of subsidy.”

Also speaking on the issue, the Secretary, IPMAN, Abuja-Suleja, Mohammed Shuaibu, said the ex-depot price of PMS in Warri as of Friday was N585/litre, while that of diesel was N820/litre and aviation fuel was N800/litre.

Shuaibu stated, “These are the prices of the products at the depots and not at filling stations. The pump price for petrol, of course, should be around N600/litre in Warri and neighbouring states, but should be higher than that in Abuja and the northern states, because these locations are far from Warri.

“There are no functional depots in Abuja and the North because all the pipelines supplying products to the region have been vandalised. However, we know that if the NNPC should sell petrol based on the forex rates in Nigeria, the cost should be much higher.”

The spokesperson, NNPCL, Garba-Deen Muhammad, could not be reached for comments as he did not respond to calls and messages sent to his mobile phone.

“So, that analogy by the Presidency in stating that petrol is cheaper here is not entirely correct. This takes us to the importance of domestic refining, which will enable us to check the demand for dollars and importation of petroleum products.
“If we actually want full deregulation, there must be local production that will check the rise in dollar. For once the dollar is rising, there’s nothing you can do to stop the simultaneous rise in petrol price.

“If not, it means the Federal Government is subsidising petroleum products, which implies that subsidy has indirectly returned.”
Ukadike insisted that the pump price of petrol should be around N680 going by the prevalent exchange rate and the price of crude oil.

He said, “With a template of N554/litre landing or ex-depot cost at the time when one dollar was N750, if you analyse and work out the arithmetic, you will find out that the current pump price of PMS should be around N680/litre now that the dollar is hitting over N850/litre.

“So what we are experiencing now is quasi or semi subsidy, but the government may not want to admit it.”

The Chief Executive, Nigerian Midstream and Downstream Petroleum Regulatory Authority, Farouk Ahmed, had said that going forward, the market would dictate the pump price of PMS as the agency would no longer fix prices or release templates for petrol.

Meanwhile, the Chairman of IPMAN in Rivers State, Dr Joseph Obele, has said the Port Harcourt refinery will likely beat the December deadline for the completion of its turnaround maintenance and will soon be refining fuel for local consumption.

Obele said in an interview with Saturday PUNCH that the pace at which work was going on at the refinery had increased, adding that while on a visit to the site recently, he noticed that majority of the work, including the mechanical and civil aspects, had been completed.

The President had earlier assured Nigerians that the refinery would commence operation by December, but the IPMAN boss said the deadline would only be realistic if the Federal Government appropriately channelled funds into the project.

He stated, “Recently, we were at the site for an oversight function and we discovered that they had double the number of workers and they were working 24 hours round the clock at the Port Harcourt refinery. Before now, the work was going at a snail’s speed, but now I can tell you that the work is going at horse speed.

“It is encouraging because they are done with the mechanical and civil jobs, and what is remaining are electrical installations and technical jobs, which they are doing now. Plus or minus, that plant will be operational by November if the government pumps in more funds. We the stakeholders have posited that the over N1tn saved from subsidy removal should be channelled into doubling the workforce as it will hasten the work.”

Natural gas committee

To reduce the impact of fuel subsidy removal on Nigerians, the President has approved the establishment of the Presidential Compressed Natural Gas Initiative.

“Deliver training and technology transfer to support the after-sales services and maintenance sub-industry to create sustainable jobs.

“President Tinubu’s focus on assembling CNG-enabled vehicles within the country will stimulate economic growth, create employment opportunities, and bolster the nation’s automotive manufacturing capabilities.”

Credit: Punch

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