Billions Of Naira Meant For Petrol Price Equalisation Unaccounted For - SAHARA REPORTERS
“No, the Marine Transport Average is not drawn down on,” Denyefa Zibima- an environment consultant told SaharaReporters via phone.
BY KELECHUKWU OGUJUN 11, 2019
The Marine Transport Average (MTA) Zibima referred to is a 15kobo Nigerians pay on every litre of petroleum product they purchase. The purpose of this surcharge is to make sure people living in the creeks of the Niger Delta and other riverine communities can buy petrol at a maximum price of N145. When multiplied by the 19,785,236,180.71 liters of petrol the Nigerian National Petroleum Corporation (NNPC) supplied in the last year, the total funds accrued to the MTA in 2018 is N2.97 billion.
The reporter engaged Zibima to find out how cheap it is to afford legally distributed gasoline in the region where all of Nigeria’s oil and gas are drilled.
“It fluctuates, it depends on supply. For the past couple of months, it has been stable at N145. Outside the state capital you’ll get it at N180-200 and in the riverine areas it is a lot higher,” he replied.
Zibima is a resident of Yenagoa, the Bayelsa state capital. The oil-rich state appeared twice on the Nigeria Bureau of Statistics (NBS), monthly Premium Motor Spirit (PMS) - same as petrol, price watch. His job of ensuring the creeks of the Delta are free of oil spills and gas flares takes him out to these areas, where transportation of petrol by road is an impossible fit.
Within and outside the Niger Delta, the government’s short term plan of making petrol prices uniform across the country has remained a dream 44 years on.
Disparate Prices in the South-South
Views like Zibima’s is most likely what formed the National Bureau of Statistics (NBS) hypothesis and spurred it to collate data on how much people buy petrol for across the country. In its PMS Price watch for 2018, December was the only month in the year the national average price was close to the N145 cost ceiling when it stood at N145.80. In that month, Bayelsa state popped up as one of the top three places where the average price of PMS was above N145-N150.
This was the state’s second appearance on that list. The first time was in July when the average price was N151.67. A neighboring state to Bayelsa-Delta also appeared once on NBS watch list of places where it is most expensive to buy petrol in Nigeria. Delta state’s appearance was in September; PMS was sold for N150.92 on an average.
“In the riverine areas it is different,” says Collins Newuwumi, a resident of Warri-Delta state’s commercial hub. He was speaking to the price differential of petrol between the riverine area and urban towns. Collins informed SaharaReporters that N145 remains the going price in urban settlements like Warri and Benin- the capital of Edo, another Niger-Delta state.
“[In Warri] it is still the same N145. It is the same in Benin. I was there on Saturday and Sunday. In the riverine areas some sell for as high as N250, some N200 and some N180. You know they would add the transport for moving it to different locations.”
Collins’s observation gives witness to Zibima’s assertion that the MTA is not applied in the transportation of petrol via water.
Did he have to buy petrol above N145 at any point in time in 2018 in Warri?
“Around September October but in December it came to the normal price,” Collins replied. “The marketers just did it on their own. There was some money they wanted from the government and the money didn’t come at all.”
“How much were you buying petrol for during that period?” the reporter probed further.
”It is between N148-150, its only Matrix (Filling station) that was selling at N145.” Collins responded.
The Failure Of The Distribution Margin
It all started in 1975 when the Petroleum Equalization Fund Management Board (PEF-MB), was created as a stop-gap measure to fill-in the gulf left by the country’s inability to meet its fuel needs across the country. It led to a smattering of prices in different locations, as transporters sought to cash in on the vacuum left by damaged pipelines and refineries that needed maintaining.
PEF-MB was then given the task of ensuring the price of petrol is uniform across the country. It executes this function through a set of payments added to the final landing cost of a litre of petrol called Distribution Margin (DM).
Sahara Reporters reached out to the Petroleum Products Pricing Regulatory Agency (PPPRA), to confirm the accuracy of this template but the official the reporter was directed to in Operations, was unwilling to provide any information on updates. The links on its website pppra.gov.ng, which relate to the reporter’s search result, were inactive. A search of pppra.gov.ng/pricing template opened a webpage with the heading ‘page not found.’ Stories in the media have however quoted the value of DM to be N14.30.
Despite the N18.37 paid on each litre of petrol brought into the country, legible hand writings on the wall and personal experiences say DM has been unable to keep the prices of petrol beneath a price ceiling- in this case, N145 per litre.
The Equalization dream
Since the DM is priced into the cost of a litre of petrol, the marketers serve as agents for PEF-MB. PEF-MB carries out its equalization attempts through three schemes- besides the MTA. Under the National Transport Average, marketers who have filling stations close to depots pay into the fund, while those with filling stations far-off from petrol storage facilities claim from the fund.
Under the Bridging fund, marketers are engaged to help supply depots whose source of purchase- pipelines, and refineries, are either broken or undergoing maintenance. If the distance between the facility where the truck gets its supplies and the receiving depot is more than 450km, it is classed as a bridging fund. If it is less than 450, it is described as inter-district scheme.
As at the time of publishing this piece, there is no provision for the equalization of petroleum products via rail or water. Still, 15K is priced for the equalization of petrol product supplied by marine transport.
Floating stations or Floating Mammoths
As the story goes, former Nigerian President, Olusegun Obasanjo had the vision to end illegal oil refining in the Niger Delta region by seeking out ways of flooding the oil-rich territory with the needed by-products of petroleum. After a 2004 tour of the area, he tasked the NNPC to come up with a way of constructing retail outlets in the creeks.
In 2006, the NNPC Engineering team then headed by Mrs. O. A. Somolu, partnered with Julius Berger to create what Wolfgang Goetsch, then head of Oil and Gas Business in the Nigerian arm of the construction conglomerate, called a ‘technical wonder.’ The first of the 12 ‘mega floating stations,’ was deployed in Okerenkoko-Delta State.
Eleven more were distributed across the various parts of the oil-laden region. By 2010, NNPC Retail said four of the 12 floating stations were functional.
However, in 2011, indigenes close to the Okerenkoko filling station described the project as another cliché ‘White elephant.’
Sources close to the matter informed SaharaReporters that at the moment, no floating station is presently functional.
Floating stations and MTA
The reporter had no inkling of floating stations before starting the story. In a conversation with a source close to how the downstream sector and price equalization operates, he was informed that the MTA goes into the leveling of prices in not just riverine areas but mountainous terrains as well.
The official went on to elaborate on how Nigeria is not prepared for deregulation, because the country does not have the attendant legal and infrastructural capacity to open up the retail end of the petroleum industry to free spirit competition. An offshoot of the heavily regulated petrol sale is that NNPC uses contractors to supply hydrocarbon products to the floating stations.
These contractors are expected to sell on or below the N145 ceiling. A contractor in Bayelsa, who asked not to be named, said fees are paid to them by the government-owned juggernaut. These commissions are however not sufficient and the filling (floating) stations are not enough to serve the state.
Consequently, residents of communities in creeks that are far from the fuel pumps, still buy above N145 when the floating stations were functional.
The big question is that since NNPC supplies the floating stations does it claim from the MTA as it does from the NTA, inter-district scheme and bridging fund?
After many futile efforts, a source in the industry finally gave something close to an answer:
“Nobody claims from the MTA, it goes into accrual,” the source claims, but, when told of the floating stations, the source said ‘no floating station is in operation.’
Each of those 12 floating stations, cost between N700-N950 million. The industry source went on to state that there are considerations to scrap the MTA. Just like the failed attempt to equalize prices across the country, efforts at increasing the volume of petroleum products sent to the creeks have failed.
“For reasons that were not explained to the affected communities, the products floating stations have since stopped functioning, thus making the operators of marine transportation services go in search of fuel in distant places in the hinterlands which consequently result in a hike in the cost of marine transportation with its attendant ripple effects of escalation of the prices of goods and services,” the contractor in Bayelsa said.
Have the other three schemes worked?
It is not only the Niger Delta states of Bayelsa, Delta, and Akwa Ibom that appeared on NBS' PMS Price watch, Taraba state in the Northeast of the country, featured on the list in all of the fourth quarter of 2018
The states that dominated the list were in the Northeast and Northwest region of the country. Taraba was on NBS radar as one of the most expensive places to buy PMS on six occasions. Kebbi was captured five times and Borno four times.
On a nationwide average, the closest the country came to N145 was in December, when the NNPC flooded the country with gasoline to avoid the formation of queues. The average price for December was N145.80. The month that witnessed the highest supply of petrol was March. This was the last month of the fuel scarcity and only in Abuja – the Federal Capital Territory (FCT), could petrol be bought for N145.
If the non-utilization of MTA is behind the price of PMS in communities surrounded by water being above the N145 mark, why then that areas accessible by the road do not get petrol at N145?
The downstream subsector source the reporter spoke with, said marketers are to blame for the hike. He further advised Nigerians to post pictures of filling stations that sold petrol above N145.
Data made available to SaharaReporters, suggests that another concrete reason could be indebtedness. According to the figures seen, as at 2017, retailers – NNPC, Major Oil Marketers Association of Nigeria (MOMAN), and Independent Petroleum Marketers Association of Nigeria (IPMAN), failed to remit N196 billion to the board. PEF-MB on its part was unable to pay N53.3 billion to marketers as at November 2017.
The downstream source explained that the debt owed between PEF-MB and the marketers is rolled over and should not affect the ability of the marketers to sell at the N145 ceiling. The source, however, declined to give an update on the current debt profile.
The Cost of the failed policy
Data obtained from NNPC’s Monthly Financial and Operations report throughout the 2018 calendar, says the corporation supplied 19,785,236,180.71 liters of petrol across the country during the year. The product was sourced from its government-owned refineries, direct sale-direct purchase agreements with traders who buy petroleum and sell the refined products to the country and offshore processing agreements with refineries across the Atlantic.
If the total litres of petrol sold are multiplied by the N18.37 priced into the cost- according to pricing templates which PPPRA were unwilling to confirm, Nigerians would have paid N363,454,788,639.64 in 2018 to ensure every resident of the country is able to buy gasoline at the same price.
Ahmed Bobboi, Executive-Secretary of PEF-MB, says the agency will soon develop an effective framework for transporting petroleum products via rail and water. This would most likely mean an adjustment to the template.
In the Petroleum Industry Governance Bill (PIGB), which was rejected by the President, PEF-MB was to receive 5% of the price of every litre of refined petroleum to keep its pipe-dream alive. If the legal and infrastructural framework alluded to by the source close to the operations of price equalization are put in place, investors could have plugged-in refineries, which would have in-turn pressurized the government to build secured pipeline networks to convey refined crude to needy processors.
Goddi Nnadi, Head of Corporate Communications for PEF-MB said he was on a four-month course and he could not recommend any other official to speak on the issues raised when he was contacted.