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NNPC Faces Pressure as Petrol Landing Cost Hits N205



Petrol - Investors King
  • NNPC Faces Pressure as Petrol Landing Cost Hits N205

The landing cost of the Premium Motor Spirit (petrol) being imported into the country has risen to at least N205 per litre on the back of the recent increase in global oil prices, putting more pressure on the Nigerian National Petroleum Corporation.

The NNPC has been the sole importer of petrol into the country for more than a year as private oil marketers have stopped importation due to shortage of foreign exchange and increase in crude prices, which have reportedly made it unprofitable for them to import the product and sell at the official pump price of N145 per litre.

As of March 20, 2018, when the international benchmark price for oil (Brent) was around $66 per barrel, the expected open market price of petrol, according to data obtained from the Petroleum Products Pricing Regulatory Agency, was around N189 per litre. The agency has not released any data since then.

The Group Managing Director, NNPC, on December 23, 2017, said the Federal Government had been resisting intense pressure to increase the pump price of petrol, noting that the landing cost of the commodity was N171.4 per litre as of December 22, 2017 when oil price was around $64 per barrel.

By adding the N14.3/litre for other cost elements such as the retailers’ margin, bridging fund, dealers’ cost and transporters’ pay, as captured in the last published template of the PPPRA, to the landing cost of N171.4, the pump price stood at N185.4/litre then.

Brent, against which Nigeria’s crude oil is priced, has risen by 25 per cent so far this year, hitting a new four-year high of $86.74 per barrel last week. It traded around $84.94 as of 1.40pm Nigerian time on Wednesday.

The Chief Executive Officer/Executive Secretary, Major Oil Marketers Association of Nigeria, Mr Clement Isong, said with oil price at $70, it was impossible for marketers to import petrol and sell at N145 per litre because it came in about N200 to N205 per litre.

“Currently, this burden is being borne by the government for Nigerians, but the truth is that it is not sustainable; it is just too heavy,” he added.

Isong said the outstanding subsidy debts owed marketers by the government remained the primary problem, adding that the debt “creates serious working capital constraints for all marketers, not just MOMAN, and makes it difficult to run our business. Any business that is owed so much debt will struggle.”

The Executive Secretary, Depot and Petroleum Products Marketers Association, Mr Olufemi Adewole, said, “It would have been a good thing if our refineries are working well, so that we can produce and refine what we use. The more crude oil prices rise in the international market, yes Nigeria makes more money. But unfortunately, the cost of refined products that we bring into the country is equally high.”

He said the subsidy element was “quite huge,” adding, “The last time I checked and it was when the oil price was lower than this, the landing cost of petrol was about N205 per litre.

“None of our members is importing since government has said it is not going to pay subsidy. So we are simply buying from the NNPC; it is only NNPC that can absorb whatever is needed to be absorbed. If we are bringing in products into the country at N210, that is about N65 above the regulated price of N145. That difference has to be absorbed by somebody. It is the government that is absorbing that through the NNPC and the PPMC.”

When contacted for comments on the implication of the recent oil price increase on fuel subsidy, the Group General Manager, Group Public Affairs Division, NNPC, Mr Ndu Ughamadu, said, “Have we ever told you that we are paying subsidy? We have been on cost recovery.

“Only the National Assembly can appropriate on subsidy, and we have consistently maintained that we are operating a regime of cost recovery in line with the Petroleum Act that guides us. Normally, the higher the prices of crude oil, the higher the prices of petroleum products and the higher the landing cost of products into the country. But the exact amount we might be losing is what I might not immediately give you.”

Asked if the oil price rally could affect the NNPC’s ability to import fuel, Ughamadu, said, “Not at all; we have the capacity, and we will continue to bring products in and augment that with what we produce locally. We have always remained the sole importer of petroleum products, particularly the PMS. The private marketers rely on us.”

The PPPRA, in its Downstream Monitor for January to April 2018, noted that petrol price had continued to rise at the international market, pushing the expected open market price far beyond the recommended pump price of N145/litre.

“As of the end of December 2017, the average expected open market price stood at N168.30/litre (about N23/litre more than the approved pump price of N145/litre). As a result, private oil marketers could not meet their supply obligation and the burden of the PMS supply fell solely on the NNPC,” the agency said.

It added, “Urgent intervention is required to encourage the participation of private oil marketers in the PMS supply; this is more so as the burden of supply is solely being borne by the NNPC.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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Shoprite: New Investor Assures Nigerian Consumers of Improved Services



Shoprite - Investors King

Following the acquisition deal between Retail Supermarkets Nigeria Limited (RSNL), owner and operator of the Shoprite stores in Nigeria, and Ketron Investment Limited, the new investor has assured consumers of robust services in the years ahead.

Ketron, a Nigerian company owned by a group of institutional investors led by Persianas Investment Limited, recently acquired the supermarket brand.

The divestment by Shoprite International was in line with its strategy to change from an ownership model to a franchise model. This change in ownership has also received the approval of the Nigerian regulator the Federal Competition and Consumer Protection Commission (FCCPC).

Speaking on the acquisition, Chairman, Ketron Investment Limited, Tayo Amusan said, “We are thrilled to complete the acquisition of Shoprite, ensuring the continued operations of one of the biggest retail success stories in Nigeria. We look forward to building an even stronger company following our acquisition and are excited about the greater impact we will achieve to the benefit of our customers and other stakeholders now and well into the future.”

Since its launch in Lagos in December 2005, Shoprite has expanded to 25 outlets across eleven states and Abuja, FCT.

According to the terms of the acquisition, Ketron acquired 100 per cent ownership of Shoprite in Nigeria and will continue operations across all existing outlets. It also plans to open additional stores and introduce more Nigerian-made products in the stores. This he noted, will also result in more opportunities for Nigerians.

“It is our vision to create fundamental change for the better within Nigeria,” said Amusan. “With benefits from our knowledge of the ever-evolving Nigerian retail marketplace, well-grounded social and economic research, and hands-on experience from our team, we are confident that this acquisition will foster a robust and sustainable business model for the ultimate benefit of all stakeholders,” he concluded.

Professional services firms, KPMG Advisory Services, MBO Capital Management Limited and Banwo & Ighodalo advised Ketron on the deal. CEO, MBO Capital, Jide Ogundare, stated that the deal signalled an opportunity for Ketron to uphold a thriving business.

“It will be hard work,” he said, “but with the plans we have in place, and with the support of the larger Shoprite family in Nigeria including our staff and every Nigerian shopper that walks through our doors, we are confident of success.”

Shoprite Holdings is Africa’s largest food retailer, operating 2,843 supermarkets in 15 countries and serving 35 million customers in Africa and the Indian Ocean Islands. At the moment, Shoprite Nigeria’s supply chain includes more than 300 leading Nigerian suppliers, and boasts small businesses and farmers among its partners and suppliers.

Ketron said Shoprite International will continue as technical advisers and Ketron will sustain the relationships established by Shoprite over the last decade and a half while ensuring a smooth “transfer of values.”

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CBN Offers Assistant In Printing Gambia’s Currency



Godwin Emefiele CBN - Investors King

The Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, has said that the bank is willing to assist the Central Bank of the Gambia to print its legal tender.

Emefiele said this in Abuja on Tuesday during a two-day visit by a delegation from the Central Bank Of Gambia, led by its governor, Mr. Buah Saidy.

This was in response to a request by the CBG for a possible partnership to tackle acute currency shortages among other currency management challenges in the country.

Saidy informed the CBN governor that relying on its current printer, De La Rue of London, for its currency needs was expensive and unsustainable.

He explained that it costs the bank about £70,000 to lift printed currencies from Sri Lanka to the Gambia.

In response, the CBN Governor assured his visitors that the bank had an extremely competitive advantage to undertake the currency printing for  Gambia, adding that the Nigerian Security Printing and Minting had a lot of idle capacity to satisfy the demand of the CBG.

He said, “I note your point on currency management. The Nigerian mint was set up in the early 1960s and we’ve been producing our currency since the early 60s and we have a lot of idle capacity to ensure that instead of you going to Europe or other countries, you will be able to benefit from our ideas.

“Our colleagues will take you to the security printing facility. Our colleagues that came in from Liberia two months ago were fascinated by the kind of facilities we have at our security printing and minting facility and I am sure that you will also enjoy them.

“And I am sure they will follow you back to the Gambia to see how they can help you to structure your economic order quantities so we can also be of assistance in printing your currency.

“And I can assure you that we can be extremely competitive if only from the standpoint of logistics and freight from Europe but it’s just going to be a few hours from here to the Gambia and the rest of them.”

The CBG Governor also noted that one of the purposes of the visit was to benefit from the CBN’s vast experiences on how it had successfully regulated the financial system and sought assistance in the areas of information technology, modernisation, cybersecurity, forex shipping and management, among others.

Emefiele in response attributed the successes to the support which the apex bank had enjoyed from the National Assembly.

He said, “On the issue of the CBN independence, I thank you for the kind words. But I think the point is that we thank our own parliament. Our parliament has been extremely supportive of the CBN.”

He, therefore, advised the CBG to work with its parliament to create laws that would provide the independence needed.

Emefele further stated that the apex bank was not sparing any effort to address issues of supply management to ensure economic growth.

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Ardova to Acquire 100 Percent Stake in Enyo Retail and Supply Limited



Olumide Adeosun Ardova - Investors King

Ardova, an indigenous energy company headquartered in Lagos, Nigeria, with extended operations in Ghana, has reached an agreement with Enyo Retail and Supply Holding Limited to acquire a 100 percent equity stake in Enyo Retail and Supply Limited.

This announcement follows the execution of a share purchase agreement by the two companies.

The company disclosed in a statement signed by Oladeinde Nelson-Cole, Company Secretary/General Counsel, Ardova Plc.

The statement highlighted the parties’ commitment to closing the transaction in line with the share purchase agreement, as soon as agreed closing conditions are satisfied, and regulatory approval is received.

Stanbic IBTC Capital Limited and Banwo & Ighodalo are acting as Financial and Legal Advisers respectively to AP, while Rand Merchant Bank and Herbert Smith Freehills Paris LLP are acting as Financial and Legal Advisers to ERSHL and certain of its shareholders.

Olumide Adeosun, Chief Executive Officer of AP, stated that “On completion, this acquisition will lead to a stronger downstream energy group that benefits from the increased customer reach and service delivery excellence of both companies, with the combination expected to produce stronger financial results.”

Ardova Plc and Enyo Retail & Supply Limited will communicate details of future progress made on this acquisition.

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