Fuel scarcity raises concern over petrol pricing as IPMAN embarks on strike - BUSINESSDAY
The current squeeze in the downstream sector which has seen long queues resurface in filling stations across Nigeria is once again highlighting the unsustainable nature of fuel pricing template which pegs the retail price of petrol at N145 per litre.
The Independent Petroleum Marketers Association of Nigeria, IPMAN, appears to have carried out its threat of embarking on strike, as fuel queues returned yesterday, in major petrol stations in Abuja, Lagos, Nasarawa state and environs.
“We want members of the public to know that we can no longer continue to sell fuel at the government approved price. The private depot owners sell a litre to us at a price between N142 and N144 per litre, which should be sold at N133.28. They got the product from the NNPC at N117 per litre,” IPMAN said in a statement.
“We will transport the product from the depots to our various stations and pay workers as well as incur other expenses. So, how will anybody expect us to continue to sell fuel to consumers below the cost price? It is not possible. We will have to increase fuel price to about N160 per litre.”
IPMAN members control some 20,000 filling stations in the country while the Nigerian National Petroleum Corporation (NNPC) manages only about 400 petrol stations. This puts the corporation at the mercy of marketers who can create artificial scarcity by simply refusing to sell.
A plethora of challenges like the delay in the payment in subsidy monies by the Federal Government has resulted in huge debt in the capital structure of marketers as they are unable service interest on loans borrowed from banks.
The liquidity challenges and margin suppression have forced many marketers to close down depots and cut jobs while those listed on the bourse have seen stock prices tumble.
“It is a switch in business model that is resulting in lower margins. Landing costs were low under the Petroleum Price Regulatory Agency template as marketers imported the products,” said Kareem Jubril, head of downstream at Ecobank energy desk.
“However, the NNPC has limited the margins as it now imports over 90 percent of the product and firms are forced to sell according to the template. The only way to boost profitability and efficiency is to cut costs,” said Jubril.
Following incessant scarcity witnessed last year, Ibe Kachikwu, Nigeria’s minister of state for petroleum resources fixed petrol prices at N145 per litre when oil prices were below $40 per litre. Since then prices have rallied above $50 per barrel widening the implied subsidy, the country is incurring on fuel imports.
While NNPC continues to deny paying subsidy on imported fuel, it has incurred the sum of N49.3billion between January and August this year on subsidy of retail price of petrol, BusinessDay calculations show.
NNPC imported 8.680 billion litres of petrol within the first eight months of 2017 and puts Nigeria’s average daily consumption at 36.5 million litres per day in the same period. At current retail price of N145 per litre, NNPC paid at least N3.50 in subsidy on each litre of petrol imported into Nigeria from January to June when the average price of crude oil was $45 per barrel and N12.4 subsidy on each litre of petrol when the price was $50 per barrel.
Maikanti Baru, NNPC group managing director who was billed to receive the Forbes Oil & Gas Man of the Year Award 2017 in the British Capital on Tuesday, flew back home to attend to what he described as a “matter of urgent national importance,” In a bid to salvage the fuel supply and distribution challenges witnessed in the country.
“For the umpteenth time, I wish to call on all Nigerians to stop panic buying. We have said times without number that NNPC has sufficient products to cater for the needs of all consumers,” Baru said.
The NNPC in a release said that the ex-depot petrol price of N133.38 per litre and the pump price of N143/N145 per litre have not changed noting that the Corporation has enough stock of fuel to ensure seamless supply and distribution of products across the country.
Panic buying continued in filling stations visited around locations in Abuja, Lagos and Port Harcourt despite assurances by the NNPC that there is adequate supply. Some Nigerians reported buying fuel above the N145 retail price.
Some of the marketers who spoke to our correspondent also confirmed the position of NNPC saying that even though they may not get the number of trucks they required, the situation is not as terrible as being projected at least for now.
The cumulative net income of six major downstream oil and gas firm that have released third quarter (Q3), 2017 financial results dipped by 29.73 percent to N17.85 billion.
The companies are Total Nigeria Plc, 11 Plc, ConOil Plc, Forte Oil Plc, MRS Plc, and Oando Nigeria Plc.
These firms were unable to translate top line (sales) to bottom line (profit) growth as combined net margins; a measure of efficiency fell to 1.80 percent in the period under review as against 3.06 percent the previous year.
Drilling down the figures shows Oando Nigeria Plc recorded a N1.96 billion loss after tax from the fuel trading and supply segment of its business despite a 61.72 percent increase in sales.
All the listed firms in the downstream oil and gas sector saw profit slump except eternal Oil Nigeria Plc.
“Volumes are dropping and NNPC has 90 days of storage and demand has fallen as people are managing their consumption,” said Dolapo Oni, Head of Energy Research at Ecobank.
MRS, Forte Oil and Total Nigeria recorded a 31.83 percent, 41.21 percent and 3.02 reduction in revenue from petroleum products to N19.46 billion, N41.20 billion and N185.1 billion in the Q3, 2017 period.
Companies operating in the downstream oil and gas sector are the worst performers among firms quoted on the Nigerian Stock Exchange (NSE). The NSE Oil and Gas Index has recorded a year to date performance of -7.01 percent, underperforming the NSE – All Share Index which has gained 41.19 percent this year.
OLUSOLA BELLO, BALA AUGIE, KELECHI EWUZIE & ISAAC ANYAOGU