Market News

By OpeOluwani Akintayo

Accelerating inflation and the foreign exchange shortage in the country have been having adverse impacts on the businesses of oil marketers, OPEOLUWANI AKINTAYO writes

The country’s high inflation trend and scarcity of foreign exchange are beginning to take a serious toll on the businesses of oil marketers. They claimed that the cost of a truck of Premium Motor Spirit or petrol had risen by 268 per cent, since the government ended the subsidy regime on May 29.

The Chairman of the Independent Petroleum Marketers Association of Nigeria, of Satellite Depot, Akin Akinrinade told The PUNCH that inflation that resulted from the badly managed foreign exchange had pushed one truck of petrol from N7m in May to N25m currently.

“The forex has been badly managed and this has impacted on the landing cost of PMS, and by extension the pump price. The cost of doing business has also gone up astronomically. A truck of petrol that was N7m in May this year is now N25m,” he said.

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According to Akinrinade, the downstream business has been unstable as a result of the high cost of products.

“Business is really unpredictable now. Bank lending rate is also very high, contributing to the high cost,” he said.

The PUNCH reported earlier this month that oil marketers were beginning to sell off their filling stations over scarcity of petrol, and their inability to afford products from private depots due to high cost.

Findings showed that the Nigerian National Petroleum Company Limited had cut down on product supply to IPMAN members due to scarcity, forcing many to sell off their stations to bigger downstream companies.

“If our members say they need about 100 trucks of petrol, what we get from NNPC would be five trucks, and it does not go round. Since NNPC is still the only one importing, they sell at an official price of N556 per litre to DAPPMAN while DAPPMAN sells to us at N616 per litre. When we add transportation and charges, the pump price would be around N630 per litre.

“Who would buy such from us at N630 per litre? And remember that our members have major marketers to contend with. MOMAN sells at lower prices because they get products directly from NNPC. But our members have to buy from DAPPMAN at N616 per litre,” a source close to the matter told The PUNCH.

According to the source, IPMAN members are closing shop because they are running at a loss and cannot afford to buy products from DAPPMAN due to the high cost and lower patronage.

“The product is scarce to get, and even banks are unwilling to give us loans because they do not want their money to be tied down,” the source added.

The National Controller Operations of IPMAN told The PUNCH that members of the association were being sidelined and frustrated out of business.

“Your findings are true because our members are not getting products, and we are beginning to sell our stations because we can’t meet up with high prices of products at private depots. They are frustrating our businesses.

“For instance, the challenge that the satellite depot has was due to vandalism of the pipeline that brings product here. NNPC told us the pipeline had been repaired and that we would get the product but up till today we are yet to get the supply.

“But maybe things will be fine when the refineries finally begin production in December. But as we speak, we are not getting supply from NNPC and we can’t even afford products from DAPPMAN. And once this depot doesn’t get the product, you can be rest assured that the whole of Lagos and South-West will be affected,” he told The PUNCH.

A former Chairman of MOMAN and Chief Executive Officer, 11 Plc, during an interview, told The PUNCH that the removal of fuel subsidies by President Tinubu in May had caused an increase in prices of petrol, and would result in major downstream companies buying over smaller ones.

“Since there is no longer a subsidy, smaller companies would not be able to sustain their businesses, and would be bought over by bigger companies like ours,” he said.

The removal of the petrol subsidy by President Tinubu in May spurred the prices of petrol to skyrocket from N185 per litre to between N585 and N620 in Lagos State and its environs, and N700 and above in the North.

A source in the NNPCL, who anonymously, because he was not authorised to speak on the matter, told The PUNCH that the company was not under any obligation to supply products to other marketers since the downstream sector was deregulated.

“Whatever NNPC is doing now is to relieve the sector. The company is not under compulsion to supply the market. Petrol is now deregulated and marketers have been issued with import licences. So, let them go ahead and import. Our own stations have products and we are selling to the public,” the source asserted.

Independent marketers have been unable to import products due to the significant depreciation of the local currency against the dollar and the increase in crude oil prices in the international market.

Brent price started the year at $76.93 per barrel and went up to $96.16 in September, before dipping to $74.29 on Thursday.

The naira has weakened from 460/$ in May to 887.16/$ on Thursday, following the unification of the country’s exchange by the Central Bank of Nigeria in June.

The development comes on the heels of a recent call by the Nigerian National Petroleum Company Limited and other stakeholders in the oil and gas sector for the development of new energy sources as part of efforts towards the realisation of the United Nation’s zero emission targets by 2050.

The Managing Director and Group Chief Executive Officer of NNPCL, Mele Kyari, during an oil and gas conference in Lagos, pushed for a reduction in costs of renewable energy production in Nigeria, stating that current high cost might hamper adopting it as the country journeys towards energy transition.

According to Kyari, high production costs would impede the adoption of clean energy in Nigeria.

In his words, “Cost is, therefore, another limitation of renewable energy and the financial barrier. If not addressed, it would impede the adoption of clean energy, especially in this part of the world with very limited economic resources.”

Acknowledging the role of renewables in helping to mitigate the adverse effect of climate change and reduce dependency on finite resources, Kyari added that the technologies of renewables were still struggling with many limitations that were yet to be addressed.

He listed some of the challenges to include the challenge of intermittency, reliability and predictability due to geological constraints and limited control of man and nature.

Kyari added: “While battery storage technology has addressed some of the intermittency challenges of renewable energy, the storage technology itself has challenges.”

He stated that the petroleum industry which had fuelled the progress of mankind for over a century was also confronted with its own inherent challenges and constraints associated with its continued production and usage.

According to Kyari, fossil fuel continues to be a finite resource of energy which means that the world’s reliance on it is unsustainable, bemoaning that the process of extraction and consumption of fossil fuels continue to leave a significant adverse carbon footprint on the environment especially if not done responsibly.

“As explorationists, we play a vital role in shaping the future of the oil industry. It is through your dedication, expertise and relentless pursuit of knowledge that will continue to unlock new frontiers, discover reserves and push the boundaries of what is technologically and economically feasible,” he averred.

While adding his voice to the need for new energy sources, the former Executive Secretary of the Nigerian Content Development and Monitoring Board, Simbi Wabote, pointed out that the world stands as a key point where adequate considerations must be made to address the energy dilemma which is achieving an appropriate balance between energy security, sustainability and affordability.

He stated that the role of petroleum explorationists was quite important, pointing out that their discoveries and evaluation were essential in establishing reliability and sustainability of the size of oil and gas reserves as a key component of the energy mix.

He noted, “The oil and gas industry has been a key pillar of global energy as it has powered and continued to power industrial and economic development across the world. I understand that we have about 208 trillion cubic feet of proven gas reserves and about 600 TCF of unproven reserves. I hope we will put some effort into firming up the recoverable volumes on these unproven reserves.”

He stated the need to develop the proven reserves considering that gas was no longer a transition fuel, but a destination fuel.

He stated the call by stakeholders for other forms of energy must ensure that there is sustainable thinking behind any of such energy sources deployed.

On his part, the Chairman and Chief Executive Officer, AMNI, said for Nigeria to grow its economy and to lift millions out of poverty, there must be renewed and intentional focus on repositioning its oil and gas industry to take advantage of the future demand.

He added that Nigeria must strategically diversify its energy portfolio mix to address the challenge of carbon emission while also providing sustainable and affordable energy to grow its economy, advising that investing in gas development projects and renewable sources would pave the way for a more sustainable and resilient energy future

The Managing Director of SNEPCO, Elohor Aiboni, said Nigeria as a country was vulnerable because of its dependency on fossil fuel for economic growth and low oil resource resilience.

She said 50 per cent of projected oil production was at risk in the event of Nigeria’s rapidly growing demography.

“With our population projected to double by 2050, it means that we are going to be creating more demand for the already lean resources we have if we do not do something about it,” she warned.

She stated that Nigeria had a huge energy gap despite its huge reserves, urging the urgent need to close the gap.