NNPC’s price ceiling creates business risk for marketers as queues linger

THE price ceiling regime enforced by the Nigerian National Petroleum Company Limited (NNPC) in a deregulated market is pushing more marketers out of business, with queues lingering in some filling stations nationwide.

The ICIR reported how the NNPC said it had no plans to enforce price increases despite rising global oil prices ($87.25 per barrel as of Thursday, October 12), which should affect petroleum prices in a deregulated market.

The development raised concerns about the fate of marketers who compete with NNPC- many of whom struggle to access the dollar at the official exchange rate.

The national oil company, in a statement, said, “We at NNPC Retail value your patronage, and we do not have the intention to increase our PMS pump prices as widely speculated. Please buy the best quality products at the most affordable prices at our NNPC Retail Stations nationwide.”

Currently, the Federal Government is using the NNPC to manage market shocks and maintain a monopoly of the downstream segment of the oil and gas industry.

THE ICIR findings have also shown that the NNPC, as a national oil company, has access to dollars at the official rate through direct sales and direct purchase agreements. Conversely, most marketers don’t have similar access to dollars despite competing with the NNPC.

The National President of the Petroleum Retail Outlet Owners Association of Nigeria (PETROAN), Billy Gills-Harry, told The ICIR that there was a gap in the fuel cost, and the gap was being bridged by the state official.

“We have 19,000 marketers under our union. As of yesterday, only 3,000 were able to sell. They don’t have access to dollars, and the price is out of their reach currently. Many of our members who were given licence to import cannot because they don’t have access to dollars. Another key factor is that the landing cost is higher than projected. We’re resorting to a stage where NNPC becomes the major importer, and marketers will be out of business.”

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AFDIN Petroleum Services Limited selling along Kubwa Expressway of the Federal Capital Territory under lock and key during the week.

President Bola Tinubu had announced the removal of fuel subsidy in his inaugural speech on 29 May.

However, government intervention in price-fixing products in a deregulated market is not a welcome development for most marketers.

The Executive Secretary of the Major Oil Marketers Association of Nigeria (MOMAN) told The ICIR that the government intervention could have come in providing incentives to alternative Compressed Natural Gas (CNG) and not pricing, which puts other marketers’ businesses at risk.

On October 6, 2023, the National President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Festus Osifo, said the Nigerian government had restored the subsidy on petrol despite the official government policy of ending the subsidy regime.

What data has revealed

Despite not being publicly displayed by the government, marketers who spoke to our correspondent said the landing cost is N720. The margin between N720 and the official price by the national oil company – N617 – is being paid by someone. The addition of freight costs, lingering costs, distribution margin, and ancillary costs by the Nigerian Midstream Downstream Regulatory Authority (NMDPRA), Nigeria Port Authority (NPA) and Nigerian Maritime Administration and Safety Agency (NIMASA), as well as marketers’ margins, stands as about N90 to N105, as provided by many marketers. When these charges are added, the price will exceed the landing costs.

The Ammasco filling Stations in Kubwa selling at N617 per litre during the week.

Fuel queue yet to surface in Lagos

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Fuel queues are yet to surface in Lagos State, although other states like Abuja have seen queues.

The ICIR visited filling stations along the Lagos-Ibadan Expressway, from Ojodu Berger bus terminal to Estate Bus Stop and can report that queues are yet to surface in the filling stations.

Commuters and other petrol users can quickly buy the product without struggle.

Our correspondent observed that the filling stations use more than one pump to dispense fuel to motorists.

AP filling Station selling at N578 per litre along Lagos-Ibadan Expressway during the week.

Some motorists even drove off from filling stations where a few vehicles drove in to buy fuel, lending credence to fuel availability in the state and most probably its neighbour, Ogun.

In all the filling stations visited, the pump price of fuel sold is between N570 and N580, meaning no hike in pump price yet.

A fuel attendant, who gave his name as Kehinde, in one of the filling stations visited, told The ICIR that the station had enough stock.

However, he said, “If we received instruction from our boss that we should stop selling for now because of the queues in other states, we would stop selling.”

The ICIR can also report that transportation fares have not been hiked.

Rainoil, Opposite Mountain Top University, Besides Mountain of Fire and Miracles (MFN), Lagos-Ibadan Expressway

Experts express concerns

For many experts, subsidy payment has returned amid the government’s denial.

“Yes, we’re paying subsidy, and it’s between N135 and N140 per litre,” an oil sector governance expert, Henry Ademola Adigun, told The ICIR.

A Public Affairs Analysts and a former Presidential aide to former President Goodluck Jonathan, Reuben Abati, said in his article titled:” Tinubunomics: Matters Arising’ that the removal of fuel subsidy has moved the pump price of petrol (PMS) from N186 in May to over N500 and as high as N617 in July.

“What is quoted is the fact that there is no provision in the 2023 Appropriation Act for subsidy beyond 1 June, and the fact that the Petroleum Industry Act (PIA) states that petroleum prices must be determined by market forces.




     

     

    Fuel queue at the NNPC filling station at the Central Business District, around Church Gate Abuja on Wednesday, October 11

    “Our neo-liberal economists praised these forces to high heavens. By August, the landing cost of PMS had risen to about N720 per litre. The same government saying that fuel subsidy had gone has since been forced to provide subsidy. Please, what happened to the market forces?”

    Lead Director of the Centre for Social Justice (CSJ), Eze Onyekpere, told The ICIR that the price of crude had increased in the global market, stressing that the ‘Group Managing Director of the NNPCL was not telling Nigerians the truth.

    Eze said, “We’re returning to an era where opaqueness of the National Oil Company could be the order of the day with the NNPCL being the sole importer.”

    Speaking on the subsidy concerns, an economist and the Chief Executive Officer of CFG Advisory, Tilewa Adebajo, said, “Of course, there is subsidy. I get information from the world markets as all prices go up, the subsidies will erode, and you have to increase that. But the other side, which we never consider, is that when the oil prices drop, the fuel price will also drop. So we need to understand the dynamics, and that’s not what we’ve been able to deal with.

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    Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

    Join the ICIR WhatsApp channel for in-depth reports on the economy, politics and governance, and investigative reports.

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