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Marketers Justify Selling Petrol Above N86.50 – Punch

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The reason why many filling stations across the country have refused to comply with the Federal Government’s directive to sell a litre of petrol for N86.50 as against the old pump price of N87 is because most of them had stockpiled the product in anticipation of a likely price increase by the government.

Compliance by filling station owners with the new pump price of N86.50 for a litre of petrol has not been great across the country even though the Department of Petroleum Resources, the regulator of the downstream petroleum sector, has vowed to punish defaulters.

In some instances, the filling station owners and managers have become more daring, displaying new prices above the stipulated maximum on their petrol dispensing pumps.

One of our correspondent actually bought petrol at a filling station along Gbongan Road, Osogbo, the Osun State capital for N110 per litre on Monday. The price was proudly displayed on the digital dispensing machine instead of the practice before of displaying the regulated price of N87 per litre, but the attendants would inform the buyer of a higher price and the difference would be calculated based on the volume bought.

When asked why the station’s management was bold to display N110 as the pump price, a female attendant simply said that was the instruction given by the owners.

The PPPRA had on Tuesday, December 29, 2015, announced that retail filling stations belonging to the Nigerian National Petroleum Corporation would from Friday, January 1, 2016, sell petrol at N86 per litre, while other marketers would sell the product for N86.5 per litre.

In Jos, the Plateau State capital, most major marketers are still selling at N87 per litre despite the N0.50 reduction in the fuel price. Only the NNPC mega stations have adjusted their pump price to the N86 stipulated by the PPPRA.

Some of the marketers told one of our correspondents that they could not afford to sell below that as they still had old stock.

One of the attendants, who simply identified himself as Ahmed, said the inconsistency in the Federal Government’s pronouncement prompted some marketers to hoard the product in anticipation of a price increase later.

“Our station discharged a full tanker before the New Year, but we were afraid of what the new price will be. However, we are for now sticking to the old price because we are still having our old stock,” he explained.

In Anambra State, a litre of petrol sold for N140 on the average on Monday as many filling station owners pretended not to have heard about the new price regime.

An attendant at a filling station in Awka said, “I don’t know about any new price for petrol. We sell a litre here for N140.”

A manager at a filling station, who pleaded anonymity said, “The new price you are talking about may be for government filling stations like those belonging to the NNPC and not for private filling stations.

“Besides, what we have here is old stock. We didn’t even buy at that price you are talking about.”

Filling stations in Enugu State have yet to comply with the Federal Government’s directive on the new pump price of petrol.

One of our correspondents, who monitored the situation on Sunday and Monday, observed that the product was being sold for between N120 and N150 per litre in different parts of the state.

In Oyo State, one of our correspondents found out that only a few independent marketers had the product and they sold a litre at prices ranging between N100 and N130.

Some of the independent marketers, who spoke on the development, said that they purchased the product at an inflated amount in Lagos.

“We are aware of the government’s directive but the truth is that we cannot sell at the government price when we purchased the product above N100 per litre in Lagos. Look around Ibadan and you will see that only independent marketers are selling the product. The major marketers cannot because they cannot buy at a high cost and sell at a loss,” he station manager of an independent filling station in Mokola area of Ibadan said.

In Niger State, independent marketers have not complied with the N86.50 per litre price regime as one of our correspondents who went round Minna, the state capital, on Monday observed that filling stations were selling the product at the old rate of N87 per litre.

The state Controller, DPR, Mr. Abdullahi Jankara, however, said he had not received any directive from the Federal Government on the new fuel price.

Filling stations in Uyo metropolis sold the product for N130 per litre on Sunday and Monday even as many of them did not open for business.

The only filling station seen selling petrol at N86 per litre was the NNPC mega station on Ikot Ekpene Road, Uyo.

A former Chairman of the Independent Petroleum Marketers Association of Nigeria, Mr. Victor Eteafia, said the downstream sector of the economy was facing a crisis.

In major cities in Ogun State, a litre of petrol was still sold for between N100 and N130 on Sunday and Monday.

In Rivers State, the product is selling for between N130 and N140 per litre as against the Federal Government’s new price regime of N86.5.

At Romans Filling Station located on Ada George Road, petrol has been selling for N130 per litre in the past one week. The filling station had been dispensing the product for N140 per litre before Christmas.

Also in Kogi State, it was gathered that the major marketers were selling the product at N87 per litre while other marketers still sell as high as N120 per litre.

The Kwara State Chairman, Independent Petroleum Marketers Association, Mr. Olanrewaju Okanlawon, said members of the body bought their current petrol stock at the old price and would comply as soon as they start buying it at the new ex-depot price.

A former Treasurer of the Independent Petroleum Marketers Association of Nigeria, Western Zone, Mr. Shina Amoo, told one of our correspondents in Osogbo that independent marketers could not comply with the directive on the new petrol price because they bought the product higher than the approved price.

He said, “I bought the product for N102 per litre on Thursday and later I bought it at N94.5 per litre. So, you don’t expect anybody who bought at those prices to sell a litre for N86; it is not possible.

“The price will continue to come down as supply increases. Government will not need to force anybody to reduce the price; the forces of demand and supply will determine the price.”

When contacted for comment on why some filling stations were not complying with the new pump price regime, the National President, Independent Petroleum Marketers Association of Nigeria, Mr. Chinedu Okoronkwo, said he expected all outlets to comply before the end of this week.

He stated that some of the filling stations still had old stocks, adding that they would have to adjust to the new price when they finish selling those stocks.

When asked if the government was still paying the marketers the bridging claims, Okoronkwo said, “There is still bridging fund. We have not been informed of any change.”

The Federal Government, through the Petroleum Equalisation Fund, pays bridging claims to the marketers to ensure that there is uniform pricing system across the country and ensure that each marketing company complies with the laws regarding the management of the transportation equalisation process.

The Deputy Manager, Communications, DPR, Mr. George Ene-Ita, said, “If they (filling station owners) don’t comply, we will sanction them; either we shut down the stations or fine them. Monitoring is a routine thing. We have a standing monitoring and compliance unit in the DPR. It is a routine procedure; it never stops.

“It is not just to monitor and enforce the government-regulated prices, but also to monitor and enforce compliance with all regulatory issues concerning the downstream. And that is going on; we are ensuring that every marketer and every facility owner complies with the new official pump price.

Informed that some marketers were selling at higher prices because they still had old stock, Ene-Ita said, “That does not concern us. Government did not stipulate two pump prices, one for old stock and one for new stock.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Another Turbulent Day

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By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

It’s been another turbulent session after stock markets turned sharply lower on Wednesday as investors fret over the outlook for the economy this year.

Results from Walmart and Target this week have brought into sharp focus the plight facing companies and consumers as inflation begins to bite. And that’s in a country that is still performing relatively strongly with a consumer that still has plenty of savings built up over the last couple of years. Others are not in such a fortunate position.

But inflation is catching up and profit margins are taking a hit. Soon enough though, those higher costs will continue to be passed on and consumers will stop dipping into savings and start being more careful with their spending. There’s a feeling of inevitability about the economy, the question is whether we’re going to see a slowdown or a recession.

The language we’re seeing from Fed officials isn’t filling me with confidence either. We’ve gone from them being confident of a soft landing, to a softish landing and even a safe landing, as per Patrick Harker’s comments on Wednesday. I’m not sure who exactly will be comforted by this, especially given the Fed’s recent record on inflation and past record on soft landings.

And it seems investors aren’t buying it either. A combination of these factors and no doubt more has sent equity markets into another tailspin, with Wall Street registering another big day of losses on Wednesday and poised for another day in the red today. Europe, meanwhile, is also seeing substantial losses between 1% and 2%.

Oil slips as economic concerns weigh

Those economic concerns are filtering through to the oil market which is seeing the third day of losses, down a little more than 1% today. We were bound to see some form of demand destruction if households continued to be squeezed from every angle and it seems we may be seeing that expectation weigh a little as we move into the end of the week.

Meanwhile, China is reportedly looking to take advantage of discounted Russian crude to top up its reserves in a move that somewhat undermines Western sanctions. Although frankly, it would have been more surprising if they and others not involved in them didn’t explore such a move at a time of soaring oil prices.

Still, I expect Brent and WTI will remain very high for the foreseeable future, boosted by the inability of OPEC+ to deliver on its targets and the Chinese reopening.

Gold buoyed by recession fears?

Gold appears to be finally seeing some safe-haven flows as markets react strongly to the threat of recession rather than just higher interest rate expectations. The latter has driven yields higher and made the dollar more attractive while the economic woes they contribute to seem more suited to gold inflows, it seems.

It will be interesting to see how markets react in the coming weeks if the investor mindset has turned from fear of higher rates to the expectation of a significant slowdown or recession. And what that would mean for interest rate expectations going forward. Perhaps we could see gold demand return.

Can bitcoin continue to swim against the tide?

Bitcoin is holding up surprisingly well against the backdrop of such pessimism in the markets. Perhaps because it’s fueled by economic concern rather than simply interest rates. Either way, it’s still trading below $30,000 but crucially it’s not currently in freefall as we’re seeing with the Nasdaq. Whether it can continue to swim against the sentiment tide, time will tell.

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Inflation Hits 40-Year High

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By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

European equity markets are a little flat on Wednesday, with inflation data this morning once again offering a reminder of the struggles that lie ahead.

Not that we need reminding given all of the data we’ve seen recently. And then there are the gloomy forecasts from central banks, with even the Fed now targeting a softish landing which feels very much like the stage before a mild recession. It may be time to buckle up and prepare for a very bumpy year.

Will BoE move to super-sized rate hikes?

UK inflation is running at a 40-year high and it’s not peaked yet as the cost-of-living crisis looks set to squeeze the economy into recession. While annual inflation came in slightly below expectations at 9%, pressures are broad-based and as the year progresses, it is expected to hit double figures.

There is still plenty more pain to come for households, most notably when the energy price cap increases again in October. But price increases are broad-based, as evident in the jump in core inflation to 6.2%. This comes as the Bank of England has warned of more pain and a probable recession, as it continues to aggressively raise interest rates in the hope of being able to catch up without inflicting too much harm in the process.

Like many other central banks, it has been heavily criticised for its misjudged faith in pandemic-induced inflation being transient for too long. And in the UK’s case, the problem looks far greater and more widespread, with Brexit effects compounding the problems and driving up prices. Can the BoE afford to continue raising rates so gradually, as markets expect with 25 basis points every meeting or will they be forced to join their US counterparts with super-sized hikes? Pressure is mounting.

Oil higher as China starts reopening

Oil prices are on the rise again as Shanghai takes a big step towards reopening following three days of no new cases in the broader community. Restrictions have been tight in many cities across China which have helped keep a lid on oil prices in this very tight market. But with activity now likely to pick up, crude prices could be on the rise once more.

Efforts toward a Russian oil embargo have failed, with Hungary continuing to stand in the way. That could be slowing the rally in oil still, as could US talks with Venezuela which may eventually lead to additional supply. Although ultimately, this comes at a time when major producers simply aren’t producing as much as they should. Russia saw its output fall by another 9% last month as a result of sanctions, which contributed to OPEC+ producing 2.6 million barrels below target, lifting compliance with cuts from 157% to 220%.

Gold looking shaky once more

Gold is a little lower on Wednesday, as the dollar strengthens once more following a few days of declines. We’ve seen a slight corrective move in the greenback which has eased some of the pressure on the yellow metal but we may be seeing that return already. Gold is currently trading a little over $1,800 and a break of it could trigger another wave lower as investors continue to factor in more interest rate hikes and therefore higher yields.

The path of least resistance

With risk aversion starting to creep back in, bitcoin finds itself back below $30,000 which may make some a little nervous. It was always going to be difficult for risk assets to significantly build on the rally in the current environment. What may be encouraging to some is that we haven’t seen a sharp reaction to the move back below such a key level. Of course, that could quickly change with below appearing to offer the path of least resistance.

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Further Pressure on Central Banks

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By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

It’s been a relatively calm start to trading this week, with Europe a mixed bag at the close and the US a little lower.

The weaker Chinese figures overnight will be of some concern at a time of slowing economic activity around the world. Still, as has been the case so often in recent years, the lockdowns will have heavily distorted the data. With lockdowns priced in to an extent, the key will be how quickly restrictions are lifted and then how well the economy bounces back.

Stock markets have come under heavy pressure globally as central banks have been forced to become part of the problem rather than the solution, as has so often been their job in the past. We’ve become very used to easy monetary conditions but now we have a devastating combination of a cost-of-living crisis, looming recession, very high inflation and much higher interest rates.

And as we’re hearing so often now, policymakers understand the pain that households are feeling and will experience going forward but getting inflation back under control is the primary focus. Which means further pain ahead.

The BoE monetary policy report hearing reflected everything we’ve heard in recent weeks as the UK heads for recession and double-digit inflation. Bailey and his colleagues accept how bad the situation in the UK is and the scale of the task at hand but whether they’re doing enough to address it is hard to say. They were among the first to start hiking late last year but have still been criticised for starting too late.

Oil near recent highs after falling on Chinese data

Oil prices have recovered earlier losses that came in the wake of the Chinese figures. While lockdowns have been priced in over the weeks, the numbers were much worse than expected which weighed heavily on crude. While an EU ban on Russian oil suffered another setback as Hungary stood firm against it, the bloc is continuing to work on an agreement while Germany is reportedly planning to phase it out regardless, which could be helping to support prices today.

Oil is trading around $110, towards the upper end of where it’s traded over the last couple of months. China looking to ease restrictions could keep prices more elevated having contributed to them trading at more reasonable levels. A move above $115 in Brent would be interesting, with that having been something of a ceiling for rallies over the last couple of months.

Gold flat but remains under pressure

Gold is flat on the day after slipping this morning below $1,800 for the second time in as many sessions. The yellow metal has been very vulnerable to rising yields and a stronger dollar recently as central banks are forced into much more aggressive action. With the dollar remaining a hot favourite and pressure intensifying on central banks to tackle inflation, gold could remain out of favour for a while yet.

Bitcoin struggles at $30,000

An impressive rebound in bitcoin after breaking $30,000 may already have run its course, with the cryptocurrency giving up earlier gains to trade a little lower on the day. It’s spent a little time over the last couple of days above $30,000 but it is struggling to hang on to them. That doesn’t bode well at a time of risk aversion in the markets and such negative coverage of stablecoins following the Terra collapse. There may be more pain ahead.

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