Stakeholders Want Micro Finance Banks Included in Kerosene Distribution

Disturbed by the persistent scarcity of kerosene due to distribution problems, major stakeholders in the downstream sector of the petroleum sector are making a case for the micro finance banks in the country to be involved in the distribution of the product.

The stakeholders, among them independent marketers, small scale distributors, tank farm owners, agreed that the involvement of micro finance banks would eliminate the activities of middlemen, who are responsible for the high cost, and artificial scarcity of the product.

At an interactive session with members of House of Representatives Committee on Petroleum Resources (Downstream), at Calabar Free Trade Zone, during the weekend, they were of the view that the involvement of micro finance banks would act as a bridge between the suppliers and the end users, as well as ensure that kerosene gets to the final consumer at right price.

Speaking on the issue, the Managing Director of Fyn field Fynefield, Petroleum, Mr. Akshay Saxena, said that since House Committee visited to ensure that good quality kerosene was sold to the consumer for the right price, it was also important to understand the workings of kerosene distribution system.

Saxena explained that price differentials occur the movement kerosene leaves the depot to other markets such as filling stations and surface tank sellers.

He said people who retail this product, DPK, were mostly surface tanks owners, who sometimes sell in large quantity than filling stations operators.

Furthermore, he said that most of retailers of kerosene including house wives, little business women and men who can sell between 5, 000 and 10, 000 litres of kerosene, cannot stock up their tanks as they don’t have sufficient money to get bulk supply.

“But the middlemen, who have money to pay, and buy large quantity would end up getting some discounts from depots. They then go back to these retailers and charge huge credit from these surface tanks owners; and they end up hiking the price enormously. So, because the surface tanks owners are getting it from bulk buyers/ middlemen on credit, they have no option than to accept it.

“So, you find a situation whereby a depot sells a litre of kerosene for instance at N135 to middlemen, who would end up selling it N200 to these surface tanks owners who also, in turn, would add addition N5 or N10 to make profit, thereby selling to end user at N210. So, as government price increases, this has been the case in the last two years, so also do retailers increase to remain in the market. Also this is because of supply and demand theory”, he stressed.

On what should be done to ensure that the end users get kerosene at a cheaper rate, Saxena said: “I, therefore, suggest that government should create a platform whereby the microfinance banks come into the picture and take the position of these middlemen, who buys product and supply on credit at exorbitant rate to surface tanks owners. “By empowering micro finance banks to fill up the gap, they would have ended up doing one of their lines businesses, which is to provide opportunity for people at micro level to do business.

“Besides, they would act as bridge between the supplier and the end user, thereby ensuring that the right pricing gets to them; the price that would not be transferred from the depot to the end user. Probably only transport cost, and a little interest the micro finance banks would charge the surface tanks owners, since the banks would be giving them some credit for some time.”