Critical stakeholders including oil marketers and depot owners in Nigeria at the weekend demanded access to foreign exchange from the Central Bank of Nigeria (CBN), noting that the dearth of access to the forex is hindering the effectiveness of deregulation.
They said this in a chain of reactions to the announcement of a N5 per litre slash in the price of Premium Motor Spirit (PMS) also known as petrol by the Minister of Labour and Employment, Chris Ngige. The new price is expected to take effect from today, Monday, December 14, 2020.
The critical stakeholders craved correction for the inefficiencies in pricing mechanisms across the downstream market.
Chairman of Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Winifred Akpani, said; “the inability to source FOREX from the official CBN FOREX window by independent marketers is continually hindering the effectiveness of the principles of demand and supply market forces to correct the current inefficiencies in the pricing mechanisms adopted in the deregulation process.”
Akpani, according to the report, also explained that inability of marketers to source FOREX creates a situation which can be described as “pseudo subsidy” in the market.
She said a large portion of marketers’ costs are FOREX dependent and must be sourced from the parallel FOREX market. “There still exists some form of indirect subsidy within the market and this can be attributed to reasons why price of petrol continues to have an upward trajectory even when international crude oil prices are going downwards'” she added.
With the recent agreement between the Federal Government and organized Labor Unions, again stakeholders in the oil and gas downstream sector of the economy are once again letting their voices heard to guarantee a full and transparent deregulation process in line with demand and supply principles of economics.
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The Minister of State for Petroleum Resources, Timipre Sylva, has in September 2020, stated that the Federal Government had stepped back from fixing the price of petrol and that prices will be determined by market forces and the crude oil prices.
Marketers were astonished at the recent price reduction especially when most marketers have stocked up products at higher costs before the new prices announced last week, to ensure that there would be product availability during the Christmas, New Year period and beyond.
Also commenting on the challenges faced in sourcing FOREX, The Chairman of Major Oil Marketers Association of Nigeria (MOMAN), Adetunji Oyebanji reiterated that “Nothing has changed. The Forex issue is still like that. And as you can see, the government has also extended that DSDP (the exchange of crude for refined petroleum products) arrangement. That’s a signal to you that foreign exchange may not be there for us to access.”
In line with his statement, many marketers believe that the deregulation process should do away with country operating the DSDP system where crude is swapped for petroleum products through the NNPC and PPMC, rather they should put in place a system that allows the country sell its crude to raise the needed FOREX and allow operators access some of these foreign exchange through the CBN FOREX window to source products at the best possible prices, thereby allowing the forces demand and supply dictate the economics of the sector for a more efficient deregulated market.
Bismarck Rewane, managing director of Financial Derivatives Company, had said that aside petrol pricing, another major element of petroleum marketing that had not been fully deregulated was access to foreign exchange, saying private importers of petroleum products did not have access to foreign exchange.
As marketers continue to complement the steps taken by government in the deregulation process, they believe that to set the right systems and processes in place, they must ensure that independent marketers have access to FOREX CBN official window, as well as stop interfering in the pricing mechanisms by setting out the right policy and implementation framework that would allow marketers in the sector participate fully in the deregulation process that allow consumers feel the right impact of a full and transparent deregulation process thereby creating the ideal economic environment for the creation of new and increased investment in the huge opportunities available in the industry and other sectors.
With the several disruptions experienced in product supply over the past years, ‘the proactive approach adopted by marketers to stock up product for the Yuletide this year towards ensuring adequacy in product distribution will result in huge losses from this price reduction which was effected following agreements with Labor Unions.
