Despite the ‘relief’ from the pains of scarcity, following the increase in the pump price of premium motor spirit, PMS, also called petrol to N145 per litre, and liberalisation of sourcing for foreign exchange, FOREX, majority of the oil marketers still depend on the Nigerian National Petroleum Corporation, NNPC, for their supplies.
Dependence on NNPC supplies follows challenges being faced by petroleum products importers and oil marketers in sourcing for the requisite forex to enable them bring in refined products. Nevertheless, with the gains of the pump price increase, marketers are now more willing to expand investments in downstream operations, including investing in private refineries.
Pending final decisions on the refineries, the Major Marketers Association of Nigeria, MOMAN, revealed that its members has already invested about $2 million in ultra-sonic metering system for a more reliable volume capture from the vessel. Speaking on the post-pump price increase status of Nigeria’s downstream petroleum sector at an interactive session with journalists in Lagos yesterday, the Executive Secretary of MOMAN, Mr. Obafemi Olawore, revealed that the hurdles in sourcing for forex from secondary sources were not yet over.
He attributed such hurdles to marketers’ continued reliance on NNPC for fuel supplies, to complement the quantities they were able to bring in, noting that at N145/litre exchange rate was put at $1 to N285, while many marketers access forex at between N320 and N350 from the parallel market. As a result, he said: “Marketers still depend on NNPC supplies, and the only way we can be free from this is for the full deregulation of the downstream sector.” Denying widely held belief that marketers were reaping bounty profits at the expense of consumers through pump price increases, Olawore said: “Far from it, nobody is making premium profit anywhere.
In fact we have remained in business for as long as we are able to cover costs.” Against this backdrop, he argued that the current practice of price adjustments ahead of full deregulation was very necessary. He said: “This is the closes we have come to deregulation, as every pump price increase is one step further to deregulation. “With this latest increase, marketers will start making some reasonable money, with which we can reinvest in the downstream.
For instance, we have invested about $2 million in ultra-sonic meters because over the years, we have had issues of mistrust between marketers and NNPC agreeing on the volumes discharged from the vessel. But with these ultra-sonic meters, there will be no disagreements. “Also, some of our members are also doing feasibility studies in private refineries and soon, people will begin to see a lot more investments in the sector to improve and enhance efficiency.”
Explaining how the current pump price was arrived at, the MOMAN scribe, who was also a member of the Price Adjustment Committee, revealed that a number of prices were touted before arriving at the price band of between N135 to N145/litre, even as most marketers preferred the upper band. He said: “N145/litre looked like the most affordable price. Initially, NNPC’s retail price was put at N104/litre at an exchange rate of N197 to $1, while other marketers was put at N145/litre at N285 to $1, but we argued that it will be suicidal for other marketers, so it was moved up to N120/litre. ” Again, we said that if the price margin between NNPC and other marketers was too wide, the purpose of the adjustment will be defeated, and it now became N143 for NNPC and N145 for other marketers.”
Olawore insisted that with full deregulation, marketers will not only be able to invest in refineries, as according to him, “full deregulation starts from the refining process. Marketers will be able to refine their own crude, sell at his own cost and be able to sell different grades of the same PMS such as regular, super, premium and five-star.”
He recalled that this was the practice in the past in Nigeria, before the indigenisation programme, which saw the acquisition of foreign owned assets by the Federal Government in the 1970s, including the Old Port Harcourt Refinery, a joint venture asset of the then BP and Shell .