BusinessDay

Inside details of the unpaid petrol bridging claims

An anticipated increase in petrol price is always unwelcome by most Nigerians, yet the current fuel shortage may get messier in the coming weeks as the face-off between the federal government and marketers looks set to intensify this week over the N74 billion bridging claims.

In Africa’s biggest economy, truck owners are threatening to stop transporting fuel across the country from Tuesday (today) over a backlog of unpaid bridging claims and non-reimbursement of insurance premiums by the oil marketers.

The Independent Petroleum Marketers Association of Nigeria (IPMAN) has promised to unleash on the nation a “mother of all fuel queues” this week on what it called the federal government’s deceit over the payment of N74 billion as bridging claims in seven months.

Last Wednesday, the federal government, through Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), said it had paid oil marketers N74 billion for bridging claims and another N2.7 billion for freight differentials to the marketers as of June 6.

However, Mohammed Shuaibu, Abuja-Suleja IPMAN secretary, countered the position of the NMDPRA on the payments of bridging claims.

What is bridging fund?

The bridging fund refers to the cost element built into the product’s pricing template to ensure a uniform price of petrol across the 774 local governments in Nigeria by reimbursing transportation costs incurred by petrol marketers.

First established in 1975, the bridging fund is a special intervention put in place by the Nigerian government with the mandate of ensuring that petroleum products are sold at equal prices across the country by paying fuel marketers for every litre of fuel they sell within 100km to 450km of a depot.

As justified by the then government, bridging of transportation costs was introduced as a temporary measure, when turnaround maintenance of the nation’s refineries was to be conducted.

However, findings by BusinessDay showed petrol prices are currently selling above the official price, despite the government’s annual spree in bridging the price of petrol.

For instance, while the official pump price of petrol was N165 per litre, data sourced from the National Bureau of Statistics (NBS) revealed that the country was unable to keep to a uniform price in May as petrol was sold in Abia State for as high as N193.20, Imo State for N188.24 and Cross River for N187.65.

The development defeated the reasons for having bridge funds as NBS further disclosed that the products sold lower in states like Ogun for N165.00, followed by Yobe (N165.36) and Benue (N165.50).

Read also: Bridging claims and the strike this time

What experts are saying

Luqman Agboola, head of energy and Infrastructure at Sofidam Capital, said: “Allowing a government body to administer bridging funds has created a rent-seeking opportunity for a gatekeeper that can easily lead to fraud, which is what we are seeing with the current fiasco between oil marketers and federal government.”

He said the country could not pretend to deregulate and set the price at the same time, nor keep an “anonymous bridging fund”, whose operational funding is not transparent.

A look into Nigeria’s 2021 and 2022 budget documents showed that the budgetary releases for bridging funds operation remain hidden. Sources at the NMDPRA say it presents its budget to the petroleum downstream committees of the Nigerian legislature and gets its budgetary allocation approved by the same committee.

Niyi Awodeyi, CEO of Subterra Energy Resources Limited, said Nigeria’s bridging funds should be discontinued as the cost of administration of equalisation had become too high, adding that the unequal application of payments by marketers has distorted the market and created market inequities and unfair competition.

“Bridging funds is not compatible with a liberalised downstream petroleum sector,” Awodeji said.

What PIA says

Section 205 (1) of the Petroleum Industry Act provides that “subject to the provisions of this Section, wholesale and retail prices of petroleum products shall be based on unrestricted free-market pricing conditions.”

Section 32 (e) also requires that the NMDPRA “provide pricing and tariff frameworks for natural gas in midstream and downstream gas operations and petroleum products based on the fair market value of the applicable petroleum products”.

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