Confusion over petrol price creates profiteering opportunities for marketers

Nigeria’s drive to clean up a fuel subsidy scheme that soaks up a fifth of federal spending is mired in confusion, with two government agencies at odds over what should be the actual price of petrol, mirroring the confusion in the government while marketers make a kill.

Despite President Muhammadu Buhari doubling as Nigeria’s minister of petroleum, there seems to be confusion on what should be the actual price of petrol as two government agencies, the Nigerian National Petroleum Corporation (NNPC) and the Petroleum Products Pricing Regulatory Agency (PPPRA) seem not to be collaborating.

Many Nigerians are left wondering why there is no synergy between the national oil company and the pricing regulator, a development that has also created a window of opportunity for most marketers who are already beginning to smuggle and hoard products in anticipation of price increase, which would enable them to make arbitrary gain.

Most stakeholders have questioned why the two government agencies will give conflicting statements despite being under one Ministry of Petroleum Resources headed by the president.

A senior stakeholder in the downstream sector told BusinesDay that the blame for the current confusion and scarcity of petrol across Nigeria should go to President Buhari and him alone.

Read Also: Corporate oil, gas deals in Nigeria fall to lowest in 5yrs

“Fixing the anomaly in the petroleum sector was precisely why President Buhari retained the portfolio of petroleum minister for himself, yet nothing seems to have changed,” the person said, craving anonymity.

Luqman Agboola, head of energy and infrastructure at Sofidam Capital, said government’s inconsistency, lack of political will and backpedalling are responsible for the current chaos in the sector.

“These inconsistencies are the cause of what we are witnessing currently. We do not have an option but to deregulate the downstream sector once and for all. Delay is just postponing the evil day. The more we delay total deregulation, the more money the economy is losing to subsidy payments,” Agboola noted.

For most stakeholders, this pall of uncertainty over whether or not the Federal Government has fully deregulated the downstream oil sector is one of the many reasons investors in the nation’s capital market have continued to demonstrate low appetite towards shares of listed firms in the sector.

For most experts, policy inconsistency has worsened some of the perennial challenges facing Nigeria’s downstream sector, ranging from poor governance and management of refining assets to low operating margin for operators, leading to low Return On Equity (ROE), huge debts/receivables on account of unpaid accumulated subsidy, and unpaid interest and foreign exchange differentials on product importation.

On Friday, Nigerians woke up to the news that the price of petrol in the country has been increased to N212.61 per litre. The increment was announced by the PPPRA in a petroleum pricing template report published on its website.

The PPPRA, which is the agency responsible for fixing prices of petroleum products in Nigeria, released its price template for petrol for the month of March 2021, calling on marketers to sell a litre of premium motor spirit (PMS), or petrol, between N209.61 and N212.61, while the ex-depot price was fixed at N206.42 per litre.

This meant that Nigerians would buy fuel at N212 per litre compared to the pre-existing price of N162-N171, an increase of over 23 percent.

The decision was immediately met with outrage as Nigerians lamented that it would further create hardships in the country.

However, in a swift reaction on Friday morning, the NNPC rushed to social media to announce that there was no increase in the ex-depot price of the commodity for the month, backing a promise it had made in a statement released in February.

Few minutes after the announcement by NNPC, PPPRA deleted the petrol pricing template announcing an increase in the retail price of petrol.

In another twist, PPPRA’s executive secretary Abdulkadir Saidu on Friday afternoon said the initial pricing template posted on its website was only indicative of current market trends and did not translate to an increase in petrol price.

“PPPRA is also mindful of the current discussion going on between the government and organised labour on the deregulation policy,” Saidu said in a statement.

He noted that consultation with relevant stakeholders was still ongoing and that “PPPRA does not fix and announce prices and therefore there is no price increase”.

Timipre Sylva, minister of state for petroleum resources, also said there would be no increment in the pump price of PMS until the conclusion of talks with organised labour.

“Irrespective of the source of that information, I want to assure you that it is completely untrue,” Sylva said.

He noted that neither the president who is the minister of petroleum resources nor himself who deputises him as minister of state has approved that petrol price should be increased by one naira.

“That’s why the commitment at the beginning of the month should have been conditional on successful completion of the ongoing discussions with organized labour,” Seun Smith, an industry research analyst, tweeted on Friday.

“Retailers will thank you for their windfall profits which is some reward for their long-suffering,” he said.

Visits to some parts of Lagos, Nigeria’s commercial capital, on Friday showed that some filling stations were shut while others were besieged by long queues of motorcycles, private cars and commercial buses scrambling to get petrol.

A survey by BusinessDay as at Friday found that most major oil marketers were still selling petrol at N162 per litre while other independent marketers had already adjusted their meters to sell at N212 per litre.

On Ikorodu Road, for instance, Randuk Filling Station sold for N212, NIPCO Filling Station sold for N212, while Ardona, Conoil and Oando were dispensing at around N166 per litre.

Some petrol stations in Ojodu, Alapere and Ikeja areas were locked while at Ojodu-Berger area, the NNPC retail outlet was also shut against motorists.

Similar ordeals were experienced by residents of Otta, Ogun State; Ibadan, Oyo State; Ilorin, Kwara State, and in numerous other cities across the country.

Efforts to reach Mike Osatuyi, national operations controller of Independent Petroleum Marketers Association of Nigeria (IPMAN), on phone or text messages failed, while Clement Isong, executive secretary of Major Oil Marketers Association of Nigeria (MOMAN), reassured there would be no increase in the price of petrol.

“NNPC has told us that they will not increase prices in March. If you recall, they have made a statement on that earlier and have reconfirmed to us that there is no increment,” Isong told state-owned News Agency of Nigeria on Friday.

Most motorists complained of the stress and the distance they had to cover to get petrol, lamenting that the situation was not only taking a toll on their personal income but also affecting their business.

“I just filled my car tank. It cost me N22,650. To put this in perspective, my first car, a Mazda 626 (tokunbo), cost me N38,750,” a commuter told BusinessDay.

By March 19 this year, the Nigerian downstream oil industry would be marking the first anniversary of a supposed liberalised sector and exit from payment of subsidy, which in essence meant that the forces of demand and supply would thenceforth determine the prices at which Nigerians will buy petrol at the pumps.

However, in reality, indifference towards deregulation, uncertainties, intrigues and a face-off between the Federal Government and labour unions have worsened situations for a sector in desperate need of private investments.

Since 2015, Africa’s biggest oil-producing country has prioritised fuel subsidy spending over funds allocated to education, health, defence, and agriculture and rural development that would have increased the economic growth or standard of living of its 0ver 200 million people.

For a vast majority of its 200 million people, though, cheaper fuel is the only benefit they see from a state that has built no social-safety net for its citizens during the oil boom.