Forex scarcity bars marketers from petrol imports

Despite the deregulation of the downstream oil sector by the Federal Government, private marketers are still tied to the Nigerian National Petroleum Corporation’s apron strings as they continue to steer clear of petrol importation, ’FEMI ASU reports

The expected resumption of petrol importation by private oil marketing companies after the deregulation of the downstream sector of the nation’s oil and gas industry has yet to materialise as operators continue to lament lack of access to foreign exchange.

The NNPC, which has been the sole importer of petrol into the country in recent years, is still being relied upon by marketers for the supply of the product – a development the Lagos Chamber of Commerce and Industry warned could derail the deregulation policy.

The Minister of State for Petroleum Resources, Timipre Sylva, said in September that the government had stepped back in fixing the price of petrol, adding that market forces and crude oil price would continue to determine the cost of the product.

Last week, the pump price of Premium Motor Spirit, also known as petrol, was hiked by marketers following the increase in the price at which the NNPC sells the product to them at its depots.

The Petroleum Products Marketing Company, a subsidiary of NNPC disclosed in an internal memo dated November 11, 2020 that the ex-depot price of PMS had been increased to N155.17 per in litre from N147.67 per litre in September and October.

The ex-depot price is the price at which the product is sold by the PPMC to marketers at the depots.

In its PMS price proposal for November, the PPMC put the landing cost of petrol at N128.89 per litre, up from N119.77 per litre in September and October.

But the NNPC later said on Friday that the ex-depot price of PMS was increased to N153.17 per litre, not N155.17, ‘based on the prevailing realities of market forces of demand and supply’.

With the increase in ex-depot price taking effect from Friday, marketers in Lagos adjusted their pump prices to between N165 and N170 per litre.

The Chairman, Major Oil Marketers Association of Nigeria, Mr Adetunji Oyebanji, told our correspondent that private marketers had not been able to resume importation of petrol primarily because of forex scarcity.

“There is not really much anyone can do because forex is not available. There is a scarcity of forex generally, not only for petrol. It is just not easy; we are all witnesses to the situation in the country. The answers are not simple.”

Oyebanji, who is the managing director/chief executive officer of 11Plc (formerly Mobil Oil Nigeria Plc), said the government was working on ensuring the availability of forex to marketers.

“There will always be some concerns because it is not really good for only one entity to be dictating everything. That entity ends up controlling the price. The entity’s considerations may not always be commercial. It calls for concern,” he added.

The National Operation Controller, Independent Petroleum Marketers Association of Nigeria, Mr Mike Osatuyi, said the government had not fully deregulated the downstream sector, adding that marketers could not access forex to enable them to import petrol.

“The PPMC is still the sole importer of petrol; so, there is a monopoly. The NNPC is the only one having access to forex,” he said, adding that the government promised to look into the situation.

The Group Managing Director, NNPC, Mallam Kyari, said last month that deregulation would eliminate market distortion, foster competition among operators, get more private sector players to build refineries in the country and promote efficiency across the entire value chain.

“We are still immersed in a monopolistic structure, even as we claim to have deregulated the petroleum downstream sector. The economy and the citizens cannot get the benefit of deregulation under the current arrangement,” the LCCI Director-General, Dr Muda Yusuf, told our correspondent.

He said deregulation without competition would not give the desired outcomes.

“The NNPC is still a monopoly in the supply of petrol. Private sector players in the sector have no access to foreign exchange to import petrol and the refineries are still comatose,” he added.

According to Yusuf, the government needs to urgently put appropriate structures in place for the deregulation regime to achieve its objectives.

“There should be a level playing field. Otherwise, the deregulation policy faces a major risk of being derailed. If this happens, we will be back to the subsidy regime with all the attendant inefficiencies and corruption,” he said.

He added that the petrol pricing and deregulation conundrum could be resolved by accelerating the process of domestic refining of petroleum products and creating a competitive market framework.

The Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr Bismarck Rewane, said for total deregulation to happen in the downstream sector, the forex market must be reformed.

He noted in a telephone interview with our correspondent that forex rationing had become the order of the day in the country because of the scarcity of dollars.

He said, “There are two things you do when there is scarcity: you either ration or you adjust the price and continue adjusting the price. So, what you are seeing is rationing.

“NNPC is the only one, for now, that has access to its own foreign exchange. What I see happening in the near future is that other people will have access after the foreign exchange market is reformed and deregulated fully.”

Asked when marketers would likely have access to forex, the foremost economist said, “I think the central bank will soon, after clearing a couple of things, open up the forex market. The intention is there but the capacity is not there to do it right now. This system cannot work until you deregulate all elements of the market.

“Now, we have deregulated petrol price; we still have to deregulate the foreign exchange rate. When the two blend together, you have a fully deregulated market where there will be no bottlenecks.”

The Federal Government removed petrol subsidy in March this year after reducing the pump price of petrol to N125 per litre from N145 on the back of the sharp drop in crude oil prices.

The Petroleum Products Pricing Regulatory Agency also announced then what it called a market-based pricing regime for PMS, saying it would advise the NNPC and others on the monthly guiding retail price at which the product should be sold across the country.

The PPPRA issued guiding prices for three months but failed to do so in August and September, leaving marketers to adjust their pump prices to reflect the increase of the ex-depot price by the PPMC.

On September 8, the PPPRA said it would no longer be releasing guiding price bands for PMS, adding that market forces would determine the price of the product.

Nigerians have seen increases in the pump prices of petrol four times in the past five months, rising from N121.50–N123.50 per litre in June to N140.80-N143.80 in July, N148-N150 in August, N158-N162 in September and N165-N170 in November.