- Calls for Deregulation of Nigeria’s Fuel Market Persist
The recent rise in the landing cost of petroleum products has renewed the calls for the full deregulation of the downstream subsector of the nation’s oil and gas industry, ’FEMI ASU writes
As private marketers continue to stay on the sidelines in terms of petroleum products importation, stakeholders have reiterated the need for the Federal Government to fully deregulate the fuel market.
The Nigerian National Petroleum Corporation has been the sole importer of petrol into the country for more than a year as private oil marketers stopped importation due to shortage of foreign exchange and increase in crude oil prices, which made the landing cost of the product higher than the official pump price of N145 per litre.
“In the downstream sector, the NNPC continued to ensure increased Premium Motor Spirit supply and effective distribution across the country. In pursuit of sustained seamless distribution of petroleum products and zero fuel queues across the nation, the corporation has continued to maintain an eagle eye on the daily stock of PMS,” the corporation said in its latest monthly report.
The Federal Government had on May 11, 2016 announced a new petrol price band of N135 to N145 per litre, a move that was described as a partial deregulation as it signalled the end of fuel subsidy.
The PUNCH reported in January 15, 2017 that the Federal Government had resorted to subsidy regime following an increase in the landing cost of petrol, with the NNPC, which was responsible for about 90 per cent of the importation of the product, bearing the latest subsidy cost on behalf of the government.
The Group Managing Director, NNPC, on December 23, 2017, said that 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, when oil price was around $64 per barrel.
The Chairman, Major Oil Marketers Association of Nigeria, Mr Andrew Gbodume, said at a briefing in October that the nation’s current business model for the distribution of petroleum products was unsustainable.
“We feel the time is now to encourage a well-informed and honest debate among ourselves as Nigerians on our downstream pricing policy, showing sensitivity to the fears of Nigerians and the challenges we face as a people and as an economy to arrive at an equitable but sustainable business model,” he said.
At the OTL Africa Downstream Conference in Lagos held earlier this month, many of the speakers and panellists highlighted the importance of deregulation in the sector.
The Principal Partner, Kenna & Partners, a law firm, Prof. Fabian Ajogwu, said the process of deregulation would carry the advantage of opening up the sector to competition “where the players are able to participate at every segment of the value chain, and the removal of entry barriers in the supply and distribution of petroleum products.”
He said, “Every player is given the opportunity to refine or import petroleum products for use in the country so far as the products so refined or imported meet quality specifications.
“The appeal of the deregulation of the downstream sector is clear in that it would encourage efficiencies in the sector. However, bold reforms will be necessary to allow for private sector entry into the sector.
“These reforms would include downstream capacity enhancements and safe operations, building up strategic product reserves, improved sector logistics, private sector investment in sector infrastructure, permanently removing all petroleum product subsidies, among others.”
The Executive Secretary, Depot and Petroleum Products Marketers Association of Nigeria, Mr Olufemi Adewole, said, “With the landing cost as it is right now, we can’t bring in products because we can’t absorb the subsidy, and we don’t have access to foreign exchange.
“If the government takes the bull by the horn and deregulate the sector, then we will see private marketers do what we know best to do.”
The Chief Executive Officer/Executive Secretary, MOMAN, Mr Clement Isong, said the downstream petroleum industry regulations should be in line with international best practice.
He said the implementation and compliance with these regulations, the concept of cost recovery and competitive investment returns will ensure the sustainability of the downstream petroleum industry.
He said, “As the market players grow their business, they will increasingly become exposed to risk management challenges and will move their capital to areas where return matches the risks.
“We recommend that government should deregulate pump prices and focus on enforcing compliance with adequate regulations on health, safety, environment and quality.”
Flour Mills of Nigeria Repays N51.64 Billion Series 2 Commercial Paper
Flour Mills of Nigeria Plc (FMN) has successfully repaid its N51.64 billion Series 2 Commercial Paper as revealed in a statement issued by the company.
This follows the earlier repayment of its N13.33 billion Series 1 Commercial Paper in August 2023.
Both the Series 1 and Series 2 Commercial Papers, totaling N64.97 billion, were initially issued on February 22, 2023, under FMN’s N200 billion Commercial Paper Programme.
The Series 1, with a yield of 13.0%, raised N13.3 billion, while the Series 2, with a yield of 14.0%, raised N51.64 billion.
FMN had launched its N200 billion Commercial Paper Programme on February 10, 2023, reflecting the company’s strategic financial planning.
The Group Chief Finance Officer, Mr. Anders Kristiansson, expressed satisfaction with the timely and successful repayment of the Series 2 Commercial Paper.
He emphasized FMN’s commitment to financial prudence and acknowledged the confidence placed in the organization by the investing public.
Kristiansson expressed gratitude to stakeholders for their continuous support, reiterating FMN’s dedication to delivering sustainable value and upholding the highest standards of corporate governance.
In addition to the successful repayment, FMN tapped into the market for its Series 3 Commercial Paper in June 2023, with subscriptions from banks and Pension Fund Administrators, contributing 39.7% and 40.8%, respectively.
The transaction was managed by FBNQuest Merchant Bank Limited as the Lead Arranger, with ChapelHill Denham Advisory Limited, FCMB Capital Limited, and United Capital PLC serving as Joint Arrangers.
African Airlines Projected to Cut Losses to $400m in 2024, Says IATA
The International Air Transport Association (IATA) has forecasted a reduction in losses for Nigerian and other African airlines from $500 million in 2023 to $400 million in 2024.
The Switzerland-based IATA made this projection while presenting the global airline industry outlook in Geneva, Switzerland, on Wednesday.
IATA’s Director-General, Willie Walsh, shared the outlook, stating that global airlines are expected to generate approximately $964 billion in revenue in the coming year.
The report indicated that airline industry net profits are anticipated to reach $25.7 billion in 2024, reflecting a slight improvement over the projected $23.3 billion net profit for 2023.
Despite the challenges faced by the aviation industry in recent years, IATA sees the $25.7 billion net profit in 2024 as a testament to aviation’s resilience.
Walsh acknowledged the impressive speed of recovery but emphasized that the net profit margin of 2.7% remains below industry expectations.
IATA estimates that around 4.7 billion people will travel in 2024, surpassing the pre-pandemic level of 4.5 billion recorded in 2019.
However, Walsh highlighted ongoing challenges, including regulatory burdens, fragmentation, high infrastructure costs, and a supply chain populated with uncertainties.
He emphasized the need for the industry to build a resilient future, given its significant contribution to global GDP and livelihoods.
Fuel prices are expected to average $113.8 per barrel in 2024, accounting for 31% of all operating costs, totaling $281 billion.
Walsh concluded by expressing optimism about more normal growth patterns for both passenger and cargo in the post-pandemic era.
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