The pricing of petrol and the volatility in the foreign exchange market are pulling the plug on marketers’ efforts to join the Nigerian National Petroleum Company Limited (NNPC) in the importation of the product into the country.
The controversy over whether petrol subsidy is really gone has reemerged as marketers continue to stay on the sidelines after some brought in cargoes following the implementation of reforms by the current administration.
Following the removal of subsidy and liberalisation of the FX market last year, over 50 oil marketers were licenced to supply petroleum products in accordance with Petroleum Industry Act (PIA).
Oil marketers told BusinessDay on Wednesday that they have stopped importing the product, citing the inability to sell at market-driven prices as the NNPC has left the pump price unchanged for months.
“For more than four months now, no other importer has brought in the product except the NNPC Ltd,” one of the marketers that got a licence to import petrol said.
The marketer said the pump price of petrol had been left unchanged by the national oil company because the government was subsidising the product. “It’s difficult to break even; no marketer has brought in the product due to the reintroduction of subsidy.”
Another oil marketer narrated how FX volatility has left marketers vulnerable to financial losses.
“Ardova tried once after the subsidy was removed but didn’t bring in more than one vessel,” he said.
Tunji Oyebanji, chief executive officer of 11 Plc (formerly Mobil Oil Nigeria Plc), said having the NNPC as the only company supplying petrol into the country was promoting unhealthy competition, which was prohibited by the Petroleum Industry Act.
“Prices of petrol are still not reflective of true market dynamics. There should be healthy competition throughout the value chain, and all these have been impossible due to the NNPCL monopoly,” he said.
Oyebanji said independent marketers have been unable to import petrol largely due to the inability to access foreign exchange at competitive rates.
“Not all oil marketers have access to forex at competitive prices. NNPC’s insistence on selling at the current price is a disincentive to marketers to bring in PMS,” Oyebanji said.
Mele Kyari, group CEO of NNPC Ltd, said on December 14 that oil marketers withdrew from the importation of petrol because they could not manage the challenges of price fluctuations in the downstream sector.
“The oil companies withdrew because they can’t manage the oscillation and responsibility that the Petroleum Industry Act imposed on us. We have the market and I can assure you that we are managing this. Some marketers buy from us and sell. But there is an element that we can’t control. For instance, truck owners can adjust their prices, we have no control over that,” Kyari told lawmakers during a session with the Senate Committee on Finance.
According to Oyebanji, the NNPC is not playing at the same level as oil marketers who are mostly accountable to external shareholders or investors.
“Some of the oil marketers have been in business for many years with experience across different countries; It is extremely difficult to prove these people don’t know what they are doing,” he said.
Since ending the subsidy last year, BusinessDay’s findings showed 56 private firms have been licensed to import petrol, and seven of them were importing as of September 2023.
On July 19, Emadeb Energy Services Limited brought in the first batch of petrol of about 27 million litres into the country.
The company said the product came into the country in a cargo valued at over $17 million with huge foreign exchange components.
“The value of this cargo here, you cannot find it in the market just like that. It is over $17 million, and you can’t, in any way, with what the FX is today. Today, we have imported 27 million litres of PMS, but local refining is the way forward for us in this country,” Adebowale Olujimi, CEO of Emadeb Energy, said on Arise TV in July.
But following the harsh economic realities in the country and threats by labour unions to shut down the economy should petrol price increase again, the government, through the NNPC, insisted the price of the product would stay at N568 or N617, depending on the location.
“The last private dealer, Petrocam, that imported petrol into Nigeria in September, cannot sell it due to the return of subsidy on the product and the insistence of the NNPC Ltd not to raise the pump price. The company was forced to sell the product to NNPC Ltd,” a source said.
Subsidy entirely removed, NNPC insists
On Wednesday, the NNPC debunked reports that it clashed with oil marketers or any other party over payment of subsidy on petrol.
Olufemi Soneye, chief corporate communications officer of the national oil company, insisted in a statement that subsidy payment on petrol has been entirely removed by the federal government and not reduced as being insinuated.
Last month, the World Bank weighed in on the ongoing debate about fuel subsidies in Nigeria, stating that without government intervention, the petrol price should be around N750 per litre, not the current price of N650.
“If we estimate what is the cost reflective of retail PMS price of the would-be and assume that importation is done at the official FX rate, it does seem that petrol prices are not fully adjusting to market conditions so that hints at the partial return of the subsidy,” Alex Sienaert, the lead economist for the World Bank in Nigeria, said during his presentation in Abuja.