The rise in crude oil prices coupled with the challenge of difficult access to foreign exchange is bound to reduce petrol imports into Nigeria by marketers.
The gradual rise in crude oil prices and the challenge in the foreign exchange markets do not go down well with marketers of Premium Motor Spirit, popularly known as petrol. They are worried that the development may erode the gains from the partial deregulation of the downstream oil sector.
According to them, the increase in crude prices and the high exchange rate of the United States dollar at the parallel market have almost wiped out the incentive to be enjoyed whenever they import petrol.
On May 11, 2016 when the Federal Government partially deregulated the downstream oil sector by increasing petrol prices from N86 and N86.5 per litre to between N135 and N145 per litre, the cost of crude oil in the international market was about $44 per barrel.
Around that period, the total cost of petrol, according to the May 11, 2016 official pricing template of the Petroleum Products Pricing Regulatory Agency, was N138.11 per litre, leaving a profit margin of N6.89 per litre for marketers.
But on Saturday, May 21, 2016, the price of crude oil rose to $47.17 per barrel, and had risen to over $48 per barrel a few days earlier.
In its updated template that was posted on Friday, the PPPRA stated that the total cost for PMS had risen to N140.01 per litre, hence, leaving a profit margin of N4.99 per litre for the marketers.
The PPPRA, which is the agency of the Federal Government in charge of fixing petroleum products’ prices, updates its PMS pricing template in accordance with the fluctuations in the global prices of crude oil.
“If you say the upper limit is N145 and I know that my total cost will be around N140, will there be any need for me to bother myself importing the PMS? Definitely there is no way I’ll do that because I won’t be able to recover my cost, and if a businessman cannot recover his cost, then there is no point going into that business,” an executive member of the Reconciliation Committee of the Independent Petroleum Marketers Association of Nigeria, Mr. Dibu Aderibigbe, stated.
He noted that marketers were faced with other operational costs, stressing that it would make no business sense to import petrol if the constraints of accessing forex were not cleared, considering the fact that crude prices were beginning to rise.
Aderibigbe said, “The funniest thing is that when the PPPRA was putting together the template, it seemed to have based the cost of dollar on N285 when sourced at the parallel market, as was stated by the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, when he appeared on the TV to explain how they arrived at the N145 per litre price.
“However, I don’t know if anyone can get the US dollar at that rate at the parallel market. The black market rate that we know is over N320 to a dollar. So, if they now base their calculation on N285, it therefore means that there is a problem already from the beginning.”
On the increase in crude prices, the IPMAN official advised the PPPRA to review its template and petrol price every fortnight.
“From $44 to around $46 or $47 is no mean change. The $2 or $3 increase cannot be overlooked. So, if you say you will be reviewing the price every month, then you might be making a mistake. To make the regime work very well, you must be ready to review the price of the PMS within an interval of two weeks, at most,” Aderibigbe added.
Also speaking on the recent petrol price policy, the Executive Secretary, Major Oil Marketers Association of Nigeria, Mr. Obafemi Olawore, said marketers had always canvassed a fully deregulated downstream oil sector as a result of the challenges they faced with accessing forex and other operational matters.
According to him, market forces like issues of accessing forex, fluctuation in crude oil prices and rising importation cost should be allowed to determine the cost of petrol as obtained in a truly deregulated sector, adding that this would engender competition among marketers.
Although Olawore commended the Federal Government for partially deregulating the downstream segment of the oil industry, he maintained that marketers would prefer a fully deregulated sector.
The MOMAN secretary, however, noted that the current petrol price regime was a sign that the sector might be fully deregulated in the near future.
“What we have now is a step towards deregulation. Deregulation is actually the end point; we are in the process and we will get there. When we get to deregulation, you will have the refining process included. As it is now, we are looking at only the petrol import side,” he said.
A senior official of an oil marketing firm, who spoke on condition of anonymity, told our correspondent that the marketers had met with the Minister of Finance, Mrs. Kemi Adeosun, to seek the Federal Government’s assistance in accessing forex, particularly as the cost of crude oil appreciates.
The official said, “Crude oil prices are beginning to rise, although marginally. This is also due to several production shut-ins in Nigeria, which were caused by attacks on oil installations in the Niger Delta by militants. This rise in crude prices does not favour the PMS importers at the moment because the sector has been liberalised and we don’t get subsidy anymore.
“Accessing forex has been a challenge for long, but the recent gain in crude prices is compounding the challenge for marketers because it is eroding our profit margins, particularly if you source your forex from the parallel market. This was actually one of the many reasons why marketers met the Finance minister recently in Abuja. You know we don’t get subsidy anymore; so, facing stiff challenges like the ones we face now may slow the importation of the PMS by the marketers.”
Olawore stated that the last time oil marketers were paid petrol subsidy was in 2015, adding that all subsidies incurred in 2016 were meant for the Nigerian National Petroleum Corporation.
FG Has Paid Fuel marketers N74B in Seven Months — NMDPRA
The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) on Wednesday disclosed that the federal government has paid oil marketers N74 billion as bridging claims in last seven months..
The agency said it was reacting to claims by the Independent Petroleum Marketers Association Nigeria (IPMAN), Suleja branch, that continuing fuel scarcity was caused by non-payment of bridging claims.
The agency said it paid N71.2 billion bridging claims and another N2.7 billion freight differentials to the marketers as of June 6.
In May, IPMAN said the government owed its members half a trillion naira being the cost of transporting petrol across the country.
However, at the time NMDPRA had claimed to have paid oil marketers bridging claims of about N59 billion in five months.
In recent months, fuel scarcity has worsened in Abuja and several other cities across the country.
Marketers had listed the high cost of buying petrol at the depots and the high cost of diesel to truck them as the major factors responsible for the recent queue.
On Monday, the government announced that the nation’s capital petroleum deliveries were up nearly 100 per cent after the government offered additional N10 freight reimbursements to marketers.
The statement by the NMDPRA reads: “The attention of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) has been drawn to allegations made by the Independent Petroleum Marketers Association Nigeria (IPMAN Suleja Branch) on product scarcity as a result of non-payment of bridging claims.
“The authority chief executive of the NMDPRA, at a meeting held on 17th May 2022 with IPMAN bridging payment was discussed extensively and the processes were explained and agreed upon by IPMAN.
“He assured IPMAN of NMDPRA’s willingness to continue making payments of outstanding claims to promote seamless operations.
“Pursuant to the meeting, the NMDPRA went ahead to make an additional payment of N10 billion in June and sought for an upward review of the freight rate which was approved by President Muhammadu Buhari and is currently being implemented.
“The Authority wishes to reiterate that bridging payment is an ongoing process which is carried out after due verification exercise by the Authority and Marketers.
“So far, the Authority paid N71,233,712,991 bridging claims and another N2,736,179,950.84 freight differentials to the Marketers as at 6th June 2022.
“A breakdown of payment made to Marketers is as follows: Major Marketers (MOMAN) received N9,958,777,487.24, IPMAN members were paid N42,301,923,616.96, NNPC Retails N6,661,459,118.61 while DAPPMAN members were paid N12,303,195,651.57, these translate to a total of N73,969,892,941.84.
“It is disheartening that despite these payments and increase of N10 bridging cost, which was approved by President Muhammadu Buhari two weeks ago, IPMAN could turn around to accuse the NMDPRA of insensitivity,” the statement said.
It said NMDPRA remains committed to ensuring a safe, efficient, and effective conduct of midstream and downstream petroleum operations.
Nigeria-Cameroon Link Bridge up for Inauguration this June – Fashola
The Minister of Works and Housing, Babatunde Fashola (SAN), has stated that the Nigeria-Cameroon link bridge will be inaugurated this June.
Speaking at the 16th inter-ministerial meeting of the group in Abuja, Fashola who doubles as the Chairman of the five regional ministerial steering committees, explained that the largely funded bridge by the African Development Bank (AfDB) is completed and in hopes that ECOWAS would deliver support for the inauguration.
“We have completed a new link bridge that links Nigeria to Cameroon, and it was funded largely by the AfDB and we are hoping that the ECOWAS commission will give us the necessary support to ensure the formal opening of that bridge sometime in the month of June,” he said.
The commitment to the piece of infrastructure, according to the minister, is to transform the road network into a first-class six-lane motorway, emphasizing that while speed is important, quality must not be lost.
“We’re trying to deliver a better life for five countries and over 40 million people who use that corridor, almost on a daily basis.
“The future is bright, this is an important investment for the people of Africa to achieve the objective of the Africa Union (AU) to create a trans-African highway,” he stated.
Lydie Ehouman, AfDB’s Chief Transport Economist and Project Task Manager, also spoke at the event, stating that the bank had been able to acquire an additional €3.5 million for the road project.
Investors King gathered that the total sum available for the initial financing of the project’s strategic research has increased to $41 million.
“The agreement for the on-lending of this additional grant by the bank to ECOWAS is currently being finalised. Thus, in addition to its substantial contribution of $25 million, the bank will have mobilised €12.63 million in the form of a grant from the European Union.
“This brings the total amount available for the financing of this highly strategic study to the equivalent of about US$ 41 million,” she stated.
She did, however, point out that specialists in member countries’ claims of delays were untrue, because the arrangement was that labor should persist while any differences were aired and rectified.
UNDP, DPGA to Promote Global Digital Goods
The United Nations Development Programme (UNDP), Digital Public Goods Alliance (DPGA), the government of Norway, and Sierra Leone have agreed to promote inclusive digital public infrastructure in countries across the world.
On Wednesday, Investors King gathered that world leaders, development organisations and philanthropic funders are set to invest in a “large-scale technology sharing, funding, and commitment to supporting the international cooperation agenda.”
In its published statement, UNDP stated that the agreement is to improve governance frameworks, which are critical to building a resilient future for countries.
At the event, global leaders committed their efforts to funding and the implementation of digital public infrastructure through a newly established Digital Public Goods Charter (DPG), which serves as a framework to increase international cooperation on this plan.
With its DPG Charter, co-led by the DPGA and the Digital Impact Alliance (DIAL), the UNDP outlines a clear vision for a coordinated global approach to building a safe, trusted, and inclusive digital public infrastructure using DPGs.
“Doing so can enable countries – regardless of income levels – to transform services and service delivery for people and communities everywhere,” the statement read.
The DPG Charter, and the commitments made by global leaders, are especially relevant given the devastating socio-economic impacts of the COVID-19 pandemic and mounting climate disruption.
These challenges, compounded with the unprecedented food, energy, and financial crisis added by the war in Ukraine, are creating an urgent need for global action.
Digital Public Goods are open-source solutions used to build digital public infrastructure (DPI), enabling countries to provide better services and foster inclusive economic growth.
While the Digital Public Infrastructure (DPI) involves digital systems like cash transfers, digital identification, and data exchange that enable the adequate provision of essential society-wide functions. It also allows the building of resilient crisis recovery.
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