With deregulation, oil consumers will have options – CEO Northwest Petroleum
Dame Winifred Akpani is the chairperson Depots and Petroleum Products Marketers Association of Nigeria (DAPPMAN) and Managing Director/CEO of Northwest Petroleum and Gas. In this interview, she speaks on the issues around the current fuel supply shortage in the country and the impending full deregulation of the sector.
What is the cause of the current fuel scarcity in the country and the high price? You know NNPC is the sole supplier, and every day a lot of products are being imported. What you are witnessing is as a result of all the hiccups I have explained. You have roads, the naira not doing much is also a big issue. NNPC has to pay a lot more money for products than they’ve ever had to pay. But by and large, I assure you that every week we are still taking a lot of products. What we are just trying to do is to ensure that there is more than enough for Nigerians. Customs says they are doing their best to make sure nothing escapes through the borders. We think that they still have to do a lot more than they are doing. One important thing also is that we need to hold everybody accountable for what they are supposed to superintend. We need to know what the daily consumption in Nigeria is.
We really don’t have scarcity in Lagos, just a little distribution issue. I can assure you that there is enough product in Lagos. If you don’t load product for one day, there’s going to be a problem. The impact will be really felt because we are talking about 40 to 50 million litres. Lagos will probably consume about 10 million litres a day. Once there’s a little hiccup, and Nigerians see four or five cars in a row, even if they have half tank, they will go and join the queue. I have had time to go to my station and plead with them that there is more than enough product. ‘We just had a little hiccup, if you really don’t need to buy today, please don’t join the queue.’
On the issue of price hike, you will not get N190 or N200 from any major marketer, not even from a DAPPMAN filling station. You know there are some people by virtue of their location, they may sell one truck in two weeks or one month. So, for that one truck, they are ready to sell N200 if that is how they will be able to run their station. But no DAPPMAN station will sell at N200 per litre.
Why are we still experiencing scarcity in Abuja?
We have multiple problems with Abuja. You all know that the roads to Abuja have been bad. We have trucks breaking down on the way. A trip that should take a truck maybe three days maximum, can take one week. Then transporters are also complaining about the maintenance of the trucks. This is what the NMDPR, the marketers, NNPC, everybody is trying to see how to work out. It is really difficult. It is a logistics issue. It’s not really a product issue. A lot of products are assigned to Abuja but freight is the major problem with Abuja. But hopefully, we will find a solution very soon.
You talked about how foreign exchange has affected fuel supply, especially by Depot owners. What is really the issue here?
Accessing USD for transactions has been an insurmountable hurdle for petroleum marketers. The difference between the Central Bank of Nigeria (CBN) exchange rate and the parallel market exchange rate continues to get wider by the day.
For example, to charter a vessel to convey 20,000 MT of PMS within Nigeria for 10 days, freight charges are denominated in USD, that comes to about N220 million at official FX rate of N440 and a whooping N440 million for petroleum marketers who have to source FX from the parallel market at N880.
Shipping business is an international business. No shipper will collect naira from you. The higher the rate, the more expensive the product will be and that is why people keep complaining. Why is this thing not selling at a particular price? We are supposed to have a particular price. I can tell you today that petrol is the cheapest in Nigeria, that is the truth. This is because the government has tried so hard to make sure that Nigerians are not affected. They tried to keep the price as low as possible.
But some things are simply impossible. You cannot take foreign exchange at N800 and still sell the same price you sold when FX was N300, it is not possible. But we are saying that it can be minimised. If you get at the official rate of N450, it is still closer to N300. Don’t forget that the price we have now is the same thing as when FX was N300. So, it is really a struggle.
Petroleum marketers also must contend with sourcing funds from the parallel market to pay for fees and levies that are denominated in USD. These include costs such as vessel hiring charges in FOREX as stated above to the Nigerian Ports Authority (NPA) and Nigerian Maritime Administration and Safety Agency (NIMASA). There are also several unauthorised operational levies/ fees incurred in the process of distribution of imported products which the regulators need to address. Sourcing these funds from the parallel market and paying unauthorised levies have left petroleum marketers in dire straits, making it virtually impossible for fresh investments that can shore up operations and service experience. DAPPMAN hereby calls on the government to establish a level playing field in the sector by giving petroleum marketers access to FX at the CBN exchange rate for their operations.
How are we sure this crisis will not last till Christmas?
We want to ensure a crisis-free Christmas. I know there is always this apprehension and that is why we are addressing the matter. Everybody is running round the circle.
Looking ahead, as we approach the yuletide and transition to the election year in 2023, the nation will need the full involvement of all operators to shore up capacity and ensure product availability at excellent service levels. While there might be fears regarding possible scarcity of PMS, DAPPMAN assures Nigerians of its ability and willingness to work assiduously to ramp up supply as the government addresses the challenges of FX availability in the sector.
Nobody has any reason to hoard products. We are there to do business. If we don’t sell, we don’t pay bills, we don’t pay expenses. To that extent, that is why we said we are going to do everything in concert with the government to make sure that we don’t have these hiccups at the end of this year.
What is DAPPMAN doing on the plan by the federal government to remove fuel subsidy in order to ensure Nigerians don’t suffer?
Whatever we do, we work with the government. Yes, hopefully we don’t know what next year will be. If deregulation was done in 2020, you would not have noticed because the prices were lower than what it is today. It is just that gradually it will come up again. The good thing with deregulation is that you adjust, you make plans. What we are doing today is just there. It is a fixed price. You are not able to be innovative in running your business which is the problem a lot of us have.
With deregulation, yes, the fear is always that prices are going to skyrocket, unaffordable. No. It will not become unaffordable. You are also going to have options. We have gas. Nigeria is blessed with abundant gas, maybe then people will take it more seriously. Someone can say, ‘look, I don’t need to have a petrol car, maybe a gas car will be cheaper for me.’ But most importantly, there will be more investment. That is what we are suffering from. As long as you don’t have fresh investments, your business is just going to run round the cycle.
Once we have more investments, I don’t have to sell only petrol, I can put CNG (Compressed Natural Gas) in your car, I can actually work with you to convert your car, if that is what you want. There is also electricity. So, there would be options but in terms of fuel, it might not be cheaper and it depends on the global oil prices. In 2020, it was cheaper than it is now. We want to assure you that with deregulation, there would be higher efficiency and we are going to have less wastage.
With competition you are free to do your business the way you want and hopefully Port Harcourt Refineries would have been completed with the turnaround they are doing. Maybe Warri too would have been completed and then we have Dangote Refineries and you know that in Niger Delta, there are quite a number of refineries coming up, those that would be fed by a lot of marginal fields and other bigger fields.
So, to that extent for us it would be an exciting period and I think for Nigerians too because the government is going to have more money for education, housing, and so many things. The governments have no money to work now. You are putting all these money in subsidy and you can’t even see what you are subidising. I keep saying that we are subsidising the rich more than we are subsidising the poor.
For over a year now, everybody is happy with oil prices all over the world, it is only Nigeria that is not happy. Why is that? Because we are not selling our oil for profit. We are using all our oil for subsidy and there is no real return to the common man on the street, that is something to think about.
The governments have no money to work now. You are putting all these money in subsidy and you can’t even see what you are subidising. I keep saying that we are subsidising the rich more than we are subsidising the poor