Major petroleum products marketers and other independent traders who recently restarted importation of Premium Motor Spirit (PMS), also called petrol, after the federal government removed petrol subsidy are contemplating to decline further importation.
LEADERSHIP Weekend was informed by industry sources that the persistent fall in the exchange rate of the Naira to the dollar has made the business unprofitable.
Only last month the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), said oil marketers have started importing petrol into the nation.
Until now, the importation of the product was solely done by the Nigerian National Petroleum Company Limited (NNPCL).
At a stakeholders’ engagement in Lagos, the chief executive officer of the NMDPRA, Farouk Ahmed, said of the 56 oil marketing companies that applied for licences, 10 demonstrated commitment while three have imported fuel into the nation.
Ahmed had listed the three companies currently importing the product to include A.Y. Ashafa, Prudent and Emadeb, adding that others would import in the coming weeks.
He had also expressed the commitment of the federal government towards the deregulation of the sector in line with the Petroleum Industry Act, PIA.
He said some challenges that previously affected the seamless importation of the product were being addressed.
Recently, the oil marketers urged the federal government to tackle insecurity and suspend the 7.5 per cent Value Added Tax, VAT on diesel as part of measures needed to impact operations in the downstream sector.
The oil markers also urged the government to put in place measures capable of addressing the rising cost of food items and transportation in the nation in order to impact the welfare of citizens affected by the recent deregulation of the sector.
The chairman, Major Oil Marketers Association of Nigeria (MOMAN), Olumide Adeosun, who applauded the government for inaugurating the committee on fiscal policy and tax reforms by President Bola Tinubu, said the measures are needed as citizens currently pass through very difficult times.
In a statement, MOMAN members had confirmed the capacity of its members to import petrol into the country; especially since their licenses are renewed on a quarterly basis.
He said: “The reality is that many of us have importation licenses that have never lapsed. We renew them on a quarterly basis via the NMDPRA portal. Some of us are also importing diesel, so we need these licenses.
“The licenses cover multiple products such as ATK, PMS, and AGO. The regulator will tell you that we need them even when we are receiving products from the Nigerian National Petroleum Company Limited (NNPCL), particularly on the high sea.”
But speaking to our Correspondent yesterday, a key petroleum products dealer, said marketers would protest rising exchange rate of the dollar and scarcity that have impacted their profitability.
The source disclosed that they cannot compete any longer as the NNPCL accesses forex at N720 per dollar while marketers buy at N780 per dollar and as at today, (yesterday), Friday dollar sold at N850, thus creating imbalance in the system.
Asked if this will push for further pump price adjustment, he said, “So long as the exchange rate keeps going up the pump price will keep going up.
“Go and check Platt and see that crude price and refined products are sold in dollar. So we buy in dollar and as such market fundamentals determine the price at which we marketers will sell.
“ As it stands now we are not ready to import else we sell at a loss because NNPCL gets dollar at lower rate and except this disparity is addressed we are going back to the previous situation” he said.
Meanwhile, president of the Nigerian Association of Liquefied Petroleum Gas Marketers, NALPGM, Olatunbosun Oladapo, has warned that rising international prices, high tax rates and vessel prices, currency scarcity, and naira depreciation would determine the new price of Liquefied Petroleum Gas, LPG, also called cooking gas, if the listed factors refused to wane by next week.
“It will begin next week because international prices have risen.” Ship costs have risen, and taxes have risen, but consumers have not earned more.
“Their purchasing power has decreased.” Everyone is in tears. “Consumers, middlemen, and retailers are feeling the pinch because business is now slow,” he warned.
Olatunbosun called the impending price increase “unfortunate.”adding, “The situation is quite bad since prices are rising. Nigerian customers are in a terrible situation since they can no longer buy petrol’, he noted.
According to him, consumers are returning to cooking with firewood, charcoal, and sawdust.
“The government should step in and alleviate the masses’ suffering by providing palliatives and lowering taxes and levies.”
“Imagine that for every 1kg of gas priced at N700, the tax would be N3.50.” “How much is there left in this business?
He encouraged the government to tax profits rather than products since customers were no longer purchasing gas.
“Local taxes are exacerbating the problem,” he added, urging marketers who have the option of purchasing things locally to set pricing with “consumers’ sympathy” in mind.
His reply follows the discovery that vessel scarcity in the worldwide market will drive up local costs of Liquefied Natural Gas, better known as cooking gas, in the coming months, according to reports.
Due to a lack of vessels on the international market, charter rates have risen ahead of the 2023 winter, when demand for heating fuel is expected to increase.
According to statistics from Spark Commodities cited by Bloomberg, charter prices increased to $284,750 per day for November and $206,750 per day for October as of August 1, 2023, quadrupling the existing price of $70,500 per day.
“Tanker supplies are becoming increasingly scarce as traders use the ships as floating storage in the hope that LNG prices will rise as the weather cools.”
“Volatile shipping rates can eat up margin for an LNG trader looking to cash in on higher winter prices, and rising transportation costs can ultimately mean higher prices for buyers in Europe and Asia.”
The number of LNG boats floating on the water for at least 20 days increased in late July, with 42 vessels recorded, which is around 27 per cent more than the same period last year.
The Nigerian LPG prices are internationally benchmarked and are always impacted by international pricing based on Nigerian Liquefied Natural Gas Contract prices.
Furthermore, the NLNG CP, like other globally traded commodities susceptible to price variations owing to market dynamics, is subject to change and can be evaluated higher or lower at least once to three times.
The depreciation of the local currency would have an effect on the domestic price of LPG.
According to the Central Bank of Nigeria, the dollar was worth N749.62 on Wednesday.
The Nigeria LNG (NLNG) Limited often sells the cooking gas it generates locally to off-takers at the current currency rate.
According to reports, the rates for 20 metric tonnes of LPG at the major Apapa, Lagos, depots between July 28 and August 7 ranged between N10.7 million and N11 million.
Local cooking gas users have been enjoying inexpensive pricing for several months due to a decline in worldwide costs.
Due to the naira depreciation, the price of LPG fell from an average of N730 per kilogramme in June to roughly N600 per kilogramme in July before rising to N750 per kilogramme in August.
According to the US Energy Information Administration, the price plummeted by 76.1 percent in June to 2.10 per one million British Thermal Units on May 31 from 8.78 per one million BTU on May 31.
According to the National Bureau of Statistics, the average retail price for refilling a 5kg cylinder of cooking gas declined by 6.71 per cent month on month, from N4,360.69 in May to N4,068.26 in June.
It fell 3.56 per cent from N4,218.38 in June 2022 to N4,218.38 in June 2022.
Kwara had the highest average price for refilling a 5kg cylinder with N4,750.00, followed by Niger with N4,691.16 and Zamfara with N4,683.33.
Ondo, on the other hand, had the lowest price of N3,287.86, followed by Ekiti and Nasarawa, which had N3,288.46 and N3,364.62.