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Petrol price hike sends marketers out of business – Investigation

By on July 4, 2016

The number of operators in the downstream oil sector has continued to thin out out since the commencement of the partial deregulation of the industry, a development that led to an increase in the pump price of petrol.

It was learnt on Saturday that petroleum product marketers, particularly independent dealers, were gradually pulling out of the petrol sale business across the country as a result of the high cost currently required to run the business.

The high business operating cost, according to marketers, is occasioned by the recent hike in the pump price of the Premium Motor Spirit, popularly called petrol, by the Federal Government and the complete removal of the fuel subsidy.

Government officials, experts and oil marketers, who spoke with SUNDAY PUNCH in separate interviews, said the capital outlay currently required to effectively operate in the downstream oil sector had virtually doubled.

They also explained that the instability in the foreign exchange market had adversely affected the finances of many oil dealers, adding that a number of marketers were finding it tough to repay the loans obtained from banks, not to talk of garnering additional funds to pay for the PMS at its new rate.

The Federal Government on May 10, 2016 announced an immediate increase in the pump price of the PMS, after months of uncertainty in which Nigerians endured debilitating shortage of petrol.

It increased the petrol price from N86.5 per litre to between N135 and N145 per litre, effectively putting an end to the subsidy regime, as it declared that oil marketers were thenceforth free to source for forex from any available channel.

“Of course, the worst hit are the independent oil marketers and it is unfortunate,” said the Corporate Affairs Manager, Nipco Plc, an oil marketing firm, Mr. Taofeeq Lawal.

Lawal stated that although the partial deregulation of the downstream sector had led to the availability of products across the country, the move, on the other hand, had thrown a lot of marketers out of business.

According to him, the ex-depot price of petrol, which used to be less than N90 per litre, depending on the depot, had increased to about N134 per litre, adding that many of the affected marketers were finding it difficult to raise enough funds to load products.

He said, “One thing that is prevalent now in the sector is that the number of operators is reducing by the day because of the cost implication in the business. To pick 33,000 litres of the PMS, you need about N5m, whereas in the past, it used to be about N2.7m. But right now, you need at least N4.7m to do that. So. the cost has appreciated and this has forced a number of operators out of the business.

“Also the average price you can get the PMS from any depot is N134 per litre and you can get 33,000 litres for one truck. The price of product to be loaded in a truck of this capacity used to be around N2.65m to N2.7m, but right now, it has risen to about N4.7m and this has really affected many marketers negatively.”

Lawal also stated that another factor negatively affecting turnover in the business was the sharp decrease in the demand for petrol, adding that “people are being very cautious nowadays about how they use fuel.”

An Executive Member of the Reconciliation Committee of the Independent Petroleum Marketers Association of Nigeria, Mr. Dibu Aderigbigbe, confirmed that many independent marketers had been out of business since the new PMS pricing policy took effect.

He, however, blamed the Nigerian National Petroleum Corporation for being the major cause of the challenges facing the affected independent marketers.

Aderigbigbe said independent oil marketers had about 7,000 loading tickets with the NNPC that had yet to be loaded and that these tickets translated to about N70bn.

“Now, this is money borrowed from banks and part of it is our working capital, but as I speak with you these huge funds are currently tied down. So, why won’t marketers be out of business,” he said.

The IPMAN official said the association had approached the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, and the NNPC on the matter, but had not received any response.

Another independent marketer noted that many dealers were not just out of business because of the recent petrol price increase, but that the situation was worsened by the resolve of the NNPC not to supply products to IPMAN members.

The marketer, who spoke to our correspondent in confidence, said, “As it is now, if you go to the NNPC, you have billions of naira belonging to independent marketers tied down at the corporation. And this is because many marketers can’t pay the difference to load and the NNPC is not going to do back-loading for you.”

On measures to address the situation, an official at the Federal Ministry of Petroleum Resources stated that the national oil firm had suggested the provision of debit notes to the independent marketers to pay the difference.

“It might not be right to say categorically that they are out of business completely, they are in business but they cannot use the money to load products until they pay the difference,” the official, who on condition of anonymity as he was not authorised to speak on the matter, said.

The Group General Manager, Group Public Affairs Division, NNPC, Mr. Garba-Deen Mohammed, said he was aware of the complaints of IPMAN members.

But when he was asked to speak for the corporation on the matter, Mohammed promised to send a mail that dealt with the issue comprehensively.

However, he had yet to do so, about 12 hours after the enquiry was sent to him, with repeated calls and text messages to remind him of the need for corporation’s inputs.

 

[Punch]