Nigerians should prepare for another increase in the pump prices of petrol, due to the continued scarcity of foreign exchange to finance the importation of the product, oil marketers have said.
According to them, the United States dollar hit an all-time high last week, as it exchanged for N400 at the parallel market.
Worried by the development, the marketers say if not urgently addressed, the pump prices of petrol will not remain at the approved rates.
It also stated that the market was to be driven by the factors of demand and supply, as it was now largely in the hands of private sector players.
But oil marketers told our correspondent on Monday that despite the competition in the business, they were struggling to retain the price of the Premium Motor Spirit within the approved range.
“The truth is that Nigerians just have to brace for higher PMS price; there are no two ways about it. The government cannot fund this market; the money is not just there. Even if the government wishes to assist, it does not have the wherewithal to do. So, Nigerians should brace for higher rates,” an official of one of the notable oil marketing companies, who spoke to our correspondent on condition of anonymity, said.
He added, “We are all aware that the price of crude has been falling in the international market and it is the dollar the government gets from crude sale that it uses to solve forex problems. So, there’s no fast rule or solution to it than for all of us, both users and marketers, to just prepare for a price hike.
“For marketers, they should know that the days of higher profits are gone. Before now, if you want to import petrol, you’ll have to wait for months and possibly bribe some people to get an import licence. But those days are gone; nowadays, every interested dealer can get the licence and this has created room for competition, which is why you still get the product at around N140 to N145 per litre. We only hope that this will continue as the dollar availability improves.”
A member of the Major Oil Marketers Association of Nigeria stated that the ex-depot price of the PMS had remained at N133.28 per litre because the marketers were doing their best to manage the situation.
The marketer, who also pleaded to remain anonymous because of the sensitive nature of the subject, said the PMS dealers hardly got forex at the rate that the government initially promised them.
He said, “It is very logical for the PMS price to rise any moment from now, for there is no way somebody can import at the rate of N400 to a dollar and you expect him to continue selling at the official ex-depot price. And mind you, the government promised to facilitate forex provision to marketers at N287 to a dollar, because you cannot buy at N400 and expect to continue selling at the prevalent rates you see at filling stations today.
“However, most depots are still managing the situation and are selling at the recommended price of N133.28 per litre to filling stations. It is when it goes above this price that you will notice the eventual increase in the pump prices of the PMS. So, if the trend of forex unavailability continues, then the situation may go out of the control of the marketers.”
On whether oil dealers have a peculiar channel for sourcing forex outside the official and parallel markets, the source said, “There’s no other way for sourcing it. Although outside the parallel market, there is still an autonomous market where you may get the dollar at rates that are less than what you get from the parallel.
“There are usually two prices at the market and marketers look at the one with the lower price, which is mostly the government regulated rate. However, the difference between the two prices is marginal most times.”
A senior official of the Independent Petroleum Marketers Association of Nigeria, Mr. Dibu Aderigbigbe, had earlier told our correspondent that the forex crisis might lead to a further hike in petrol price if it persisted.
“The dollar is the major legal tender used for the importation of petroleum products; so, any crisis in forex will definitely affect the prices of these commodities in the long run. However, we hope the situation is addressed in earnest,” he said.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, recently made it clear that the government had liberalised the downstream oil sector, stressing that the refined products and their prices were in the hands of private sector players.
When contacted, the spokesperson for the CBN, Mr. Isaac Okoroafor, said since the flexible foreign exchange rate regime commenced, the apex bank made it clear that all transactions would be based on the prevalent forex market rate.
He said, “As soon as we introduced the new flexible foreign exchange market, it was made clear to everybody that all transactions must go through that market. The only concession we made was that, yes, we agreed that the IOCs will sell dollars to petrol importers, but it must be at the prevailing rate of the market on the day of the transaction.
“What we have done for transactions concerning oil importation is that the IOCs are allowed to sell their foreign exchange to petrol importers, because oil is a very important commodity to the nation. But the IOCs must sell at the ruling exchange rate from the market for that day and this means the prevalent rate for the day.
“For instance, today, the market closed at N311 to a dollar, which means if they (IOCs) are selling, they have to sell to the marketers at that rate. The CBN never promised anybody a lower rate; it is the market that determines the rate.”
However, the spokesperson for the Nigerian National Petroleum Corporation, Mr. Garba-Deen Mohammed, did not answer calls made to his mobile telephone number.
He also did not respond to a text message sent to his telephone on the matter as of the time of filing this report around 9.20pm.
But the General Secretary, Nigeria Labour Congress, Peter Ozo-Eson, said the removal of the fuel subsidy in an import-driven regime for petroleum products was the beginning of crisis.
Ozo-Eson said the NLC had warned Nigerians during the last protest it organised against the increase in the pump price that the subsidy removal would result in an uncontrollable increase in the price of the commodity.
He stated that a look at the current prices of diesel and kerosene showed that the government was only managing the current pump price of petrol to prevent people from losing faith in the decision to remove subsidy on the product without first ensuring local refining.
The labour leader argued that with an exchange rate of N400 to the dollar, the pricing template would be higher than the recommended pump price, which would result in a crisis.
Ozo-Eson stated, “If you recall what led to our strike and protest the other time, then we said that it was the beginning of a crisis to do what they had done under an import regime for petroleum products and that it would lead to a spiral that we would have no control over. And so, I do not see how the price of the PMS will remain at N145 or thereabout with the pressure on the naira, and we predicted that.
“As a matter of fact, when you look at what is happening to the prices of diesel and kerosene today, then you will realise that for now, they are just managing and holding on to the price of the PMS in order for people not to lose faith in what they have done.
“But with time, we are going to face the reality that if the naira is 400 or more to the dollar, and you now go down through the template, you are going to find that the recommended pump price will be much higher and there will be a crisis.”
He said that the government had the option to either allow the market to collapse or bring in some form of support to address the situation.
According to him, it is up to Nigerians to either endure it or mount pressure on the government to take steps to protect them.
OPEC+ Delegates Seek Steady Oil Production Levels as Committee of Ministers Meet Next Week
With the recent hike in the prices of oil at the international markets, the delegates of the Organisation of Petroleum Exporting Countries (OPEC) have canvassed for a steady oil production output.
This is coming a few days before the Joint Ministerial Monitoring Committee of the organisation would meet to deliberate on the demand and supply chain of crude oil in the global space.
The meeting of the Advisory Committee of Ministers is said to hold online as top OPEC officials continue to push for unchanged oil production levels.
Investors King reports that there has been an uncertain recovery in global demand for oil as international oil prices had climbed in the past two weeks.
It was gathered that Saudi Arabia and its partners are planning to hold a review of output levels on February 1, 2023 after agreeing significant cutbacks late last year to keep world crude markets in balance.
While awaiting clarity on the recovery in consumption in China and the impact of sanctions on Russian supply, the delegates said they expected the Ministers not it tamper with the output.
The Opec+ is embracing conservative stance even China, the biggest oil importer in the world battles devastating effects of COVID-19 pandemic.
Also, Opec+ is expecting the full impact of European Union sanctions on member-country Russia over its invasion of Ukraine.
Analysts at Eurasia Group have said, in a report, that there are possibilities of Opec+ maintaining the status quo beyond next week’s meeting.
According to the report, prices of oil have stabilised while there are significant levels of uncertainty surrounding both supply and demand.
It was gathered that feedback from the top OPEC hierarchy would go a long way in forming the decision to hold steady or not.
The Secretary-General of petroleum exporting countries, Haitham Al-Ghais has expressed hope on the global economy as the nascent rebound in China is tempered by weakness in advanced economies.
For Saudi Energy Minister, Prince Abdulaziz bin Salman, Opec+ would be proactive and preemptive to keep markets in equilibrium.
The head of commodity strategy at RBC Capital Markets LLC, Helima Croft, said there were pointers that Saudi Arabia wants to adopt the policy of preemption and keep production constraints in place until there are clear indications that there is sufficient demand for additional supply.
Analysts at Goldman Sachs Group Inc. and Energy Aspects Ltd. revealed that Opec+ will only start to reverse its supply curbs, which were formally about 2 million barrels a day, and increase production in the second half of the year.
At this period, accelerating demand would have tightened the market.
Meanwhile, the 23-nation alliance is scheduled to meet at OPEC’s Vienna headquarters in early June to review production levels for other months in the year.
Oil Gains Marginally on Possible Demand Recovery in China
Oil prices inched slightly higher on Wednesday as optimism for a demand recovery in China and expectations that major producers will maintain current output policy offset global recession worries.
Brent crude oil, against which Nigerian oil is priced, appreciated by 17 cents, or 0.2%, to $86.30 per barrel after falling by 2.3% on Tuesday. U.S. West Texas Intermediate (WTI) crude climbed 7 cents, or 0.1%, to $80.20, after a 1.8% drop on Tuesday.
“Expectations that China’s fuel demand will recover in the second half of the year are growing and are likely to support market sentiment,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
Analysts from the Bank of America Securities said the reopening of the Chinese economy after years of tough COVID restrictions could unleash a large wave of pent-up demand over the next 18 months.
On the supply side, volumes should remain steady for the medium term as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, is expected to keep its output policy unchanged.
An OPEC+ panel is likely to endorse the producer group’s current oil output policy when it meets next week, five OPEC+ sources said on Tuesday, as hopes for higher Chinese demand are balanced by worries over inflation and the global economy.
OPEC+ in October decided to trim output by 2 million barrels per day from November through 2023 on a weaker economic outlook.
However, gains in oil prices were capped by a bigger-than-expected build in U.S. oil inventories that was reported after the market settled on Tuesday.
U.S. crude stocks rose by about 3.4 million barrels in the week ended Jan. 20, according to market sources citing American Petroleum Institute figures. That was triple the forecast for an about 1 million build in a preliminary Reuters poll on Monday.
Nissan’s Kikukawa, however, expects the build “to be temporary as the supply disruptions from a cold snap in the United States a few weeks ago would only impact data in the next couple of weeks”.
Official data from the U.S. Energy Information Administration will be released later on Wednesday.
Kikukawa expects WTI to trade in a range between $75 and $85 a barrel in the coming weeks.
Markets are also watching out for interest rate decisions from central banks for more trading cues.
“It seems that the absence of hawkish Fed comments from the current blackout period has removed a key overhang for risk sentiments for now, providing some renewed traction back into growth,” Yeap Jun Rong, market analyst at IG, said in a note.
Investors are waiting to see if the U.S. Federal Reserve will “react to recent downside surprise in inflation and growth” when it meets next week, the analyst added.
Fuel Scarcity: IPMAN Decries 50% Reduction of Product Supply Since July 2022
The Independent Petroleum Marketers Association of Nigeria, IPMAN has faulted the oil sector’s incapability to cater for the full fuel supply order of oil marketers nationwide.
Investors King learnt that the volume of products supplied to marketers dropped by 50 percent since July, 2022 which has worsened the fuel scarcity situation.
The Deputy National President of IPMAN, Zahra Mustapha, during a Television interview stressed that there is confusion in the nation’s oil sector.
Mustapha, who said the fuel subsidy issue is complex, explained that the federal government is overwhelmed by the burden of fuel subsidy which is not sustainable.
“The fact of the matter is that we are in a very complex situation because the burden of subsidy that the government is carrying is no more sustainable and the volume that the NNPC for now, being the sole importer of the petroleum product, PMS, has been hit hard, because of that the supply that we receive as the marketers at the loading point is being reduced by over 50 per cent.
“It doesn’t seem that they (NNPC) are bringing in more, if they are, we will be getting the volume we usually get before. Since July/August last year the volume we receive now is not up to 40 or 50 percent of what we usually get. As of today, the volume we are getting is not enough,” he said.
Mustapha stated that the situation has been reported to the oil sector regulatory bodies and the oil marketers are expecting their actions.
He further lamented the high supply cost and transportation which makes them sell it at a much higher rate to the consumers.
“We are supposed to get this product at N148 but we are buying at N22o and it keeps increasing. 240 in Lagos, 235 in Warri, 240 in Port Harcourt, in Calabar it is as high as N250 per litre for marketers, and you buy and transport yourself to where your retail outlet is. We cannot buy the product between 220 to 240 naira, transport it for about N50, which is already N300, then expect the marketer to sell to the public for N200 or N190. It is not realisable.
“There are a lot of confusions in the industry, which the government must come in and address these confusions so that the common man can get the product for the approved price,” said Mustapha.
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