Agusto & Co, an indigenous African credit rating agency is forecasting a revenue fall of about N4.3 trillion by oil marketers in Nigeria due to the economic impact of coronavirus pandemic on fuel consumption.
“The consumption of petroleum products particularly Premium Motor Spirit (PMS) and Aviation Turbine Kerosene (ATK) is expected to decline to 27.2 billion litres in 2020 given the severely restricted travel and transportation activities during the second and third quarters of the year,” Agusto & Co said in its 2020 Oil and Gas Downstream Report.
Agusto & Co expects the above development to translate to a revenue decline of N4.3 trillion in 2020 for both major and independent oil marketers.
The Federal government had in March announced its plans to stop the subsidy payment regime as they said that the downstream sector of the oil industry will be fully deregulated.
Read also: Why we insist on full deregulation of downstream oil sector &; marketers
Petrol prices in the oil-rich country have increased for three straight months, r ising from slightly over N121 ($0.32) per litre in June to over N143 ($0.38) in July, N150 ($ 0.39) in August, and N162 ($0.43) in September.
Agusto & Co. expects the recent adjustment of the official exchange rate from N306 to N380/$ to test the sustainability of the pricing template before the end of 2020.
“Notwithstanding, the new pricing regime is expected to emplace a more transparent operating model, stimulating investment growth and encouraging the importation of products by Oil Marketing Companies,” Agusto & Co. said.
The rating agency said the lockdown restrictions implemented by the government as part of an effort to curtail the spread of the coronavirus disease affected the consumption of petrol significantly.
The report revealed that the growth of the Nigerian oil and gas downstream industry remained hindered by the lack of substantial investments, import constraints, and regulated pump prices.
It said, “This is largely attributable to the dominance of the government in the industry, particularly in relation to the importation of refined petroleum products.
“Over the years, the industry has enjoyed a stable demand for petroleum products as a result of the subsidies provided by the government. This contributed to the gradual crippling of government finances.”
Agusto & Co. noted that the Federal Government had taken positive steps to fully deregulate the industry, highlighting the recent reviews of petrol pump price.
It said, “The consensus medium- term outlook for the crude oil market is positive, which implies that the price of petrol will be higher than the old regulated pump price in the near future.
“The pricing of PMS will continue to be overseen by the Petroleum Products Pricing Regulatory Agency through a pricing template. The new pricing template takes several factors such as the petroleum product cost and the foreign currency conversion rate into consideration.”
Agusto & Co noted that no white fuels were produced at the nation’s refineries for the seven months from June to December 2019 due to on-going rehabilitation works.
Agusto & Co. also believes that the continuous efforts of the government to deepen the utilisation of LPG in Nigeria will continue to bear fruit in the medium to long term.
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