Scarcity: Petroleum Marketers Calls For Total Downstream Deregulation

Scarcity: Petroleum Marketers Calls For Total Downstream Deregulation

By Seyi Peters | Staff Reporter on May 16, 2015
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Nigerians Pump petrol price

The Depot and Petroleum Products Marketers Association (DAPPMA) have called on the federal government to quickly deregulate the downstream sector to save the country the embarrassment of perennial scarcity of petrol.

The 40 companies in the association with combined total storage capacity in excess of 750,000 metric tonnes are strategically located in Lagos, Calabar, Port Harcourt, Onne, Warri, Oghara and Koko.

Executive Secretary of DAPPMA, Mr. Olufemi Adewole said on Friday, May 15, 2015 that the government should quickly commence a phased process to achieve full deregulation between nine and 12 months, while also ensuring that the refineries operate at 100 per cent installed capacity.

He noted that the economy could not sustain the subsidy regime, adding that the details of a phased deregulation could be worked out by the federal government in conjunction with the major industry players.

“Then and only then can we say ‘goodbye’ to recurring fuel scarcity in the country,” he said.
Adewole stated that fuel importations are sourced at the international market wherein the forces of demand and supply determine the price and all transactions are denoted in the US dollar.

According to him, the exchange rate of the naira to the US dollar also impacts the landing cost of the fuel.

He said in view of the huge funding requirement for such transactions, DAPPMA members had to depend on bank loans to fund each cargo in line with the guidelines established by the PPPRA, critically that which stipulates  that the marketers are to sell petrol at the government approved pump price and get reimbursed within 45 days.

“There is no special gain to depot owners beyond the N1.60kobo per litre template provision for storage as enshrined in the PPPRA guidelines,” he added.

Adewole noted that the Federal Government’s non adherence to the terms guiding the PSF scheme to refund the difference between the international price of the imported fuel and the local selling price which is supposed to be refunded within 45 days of discharge, has created serious financial challenges for all importers alike as they are forced to bear unplanned interest costs on their credit lines from the commercial banks.

“Another area of contention is the instability of the exchange rate. Central Bank of Nigeria, CBN’s devaluation of the naira from N156/$1USD to (initially above N200/$1USD and later stabilized at) N190/1$USD placed additional financial burden on fuel importers. To the ordinary citizen, the drop in the international price of crude oil should translate to a drop in the local price of fuel however the CBN’ devaluation of the naira at the same time had a direct opposite effect on imported fuel as it only made the medium of purchase which is the $US dollar more costly to obtain. Import processes which began on the basis of the former exchange rate can only be concluded on the basis of the new foreign exchange rate adding N44/1$USD for such transactions,” he said.

“All these, the main subsidy, the interest on delayed reimbursement and the foreign exchange differentials owed to DAPPMA and MOMAN members as at today is in excess N200bn and the interest component will continue to rise until importers are paid to facilitate a refund to the commercial banks,” he added.
According to him, these commercial banks have informed DAPPMA that they have exhausted available credit lines with them hence importers should refund some of the loans earlier extended to them.

“While the public has been informed that marketers were paid about N342.5bn in November 2014 and N37bn in March 2015, we would like to know why, despite a provision of more than N900 billion for subsidy in 2014, marketers are still being owed for deliveries made in 2014 thereby incurring avoidable interest and foreign exchange differential due to the 2015 devaluation of the naira,” he added.

The organisations appealed to the federal government to authorise and pay the verified and outstanding subsidy claims, the foreign exchange differential component and the interest on delayed payment component to DAPPMA and MOMAN members, which after confirmed payment of the announced N154.2 billion is in excess of N200 billion.

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