Oil Mar­keters’ rev­enue to drop by N4.3tril­lion in 2020 – Agusto & Co


Agusto & Co, an indige­nous African credit rat­ing agency is fore­cast­ing a rev­enue fall of about N4.3 tril­lion by oil mar­keters in Nige­ria due to the eco­nomic im­pact of coro­n­avirus pan­demic on fuel con­sump­tion.

“The con­sump­tion of petroleum prod­ucts par­tic­u­larly Pre­mium Mo­tor Spirit (PMS) and Avi­a­tion Tur­bine Kerosene (ATK) is ex­pected to de­cline to 27.2 bil­lion litres in 2020 given the se­verely re­stricted travel and trans­porta­tion ac­tiv­i­ties dur­ing the sec­ond and third quar­ters of the year,” Agusto & Co said in its 2020 Oil and Gas Down­stream Re­port.

Agusto & Co ex­pects the above de­vel­op­ment to trans­late to a rev­enue de­cline of N4.3 tril­lion in 2020 for both ma­jor and in­de­pen­dent oil mar­keters.

The Fed­eral gov­ern­ment had in March an­nounced its plans to stop the sub­sidy pay­ment regime as they said that the down­stream sec­tor of the oil in­dus­try will be fully dereg­u­lated.

Petrol prices in the oil-rich coun­try have in­creased for three straight months, r ising from slightly over N121 ($0.32) per litre in June to over N143 ($0.38) in July, N150 ($ 0.39) in Au­gust, and N162 ($0.43) in Septem­ber.

Agusto & Co. ex­pects the re­cent ad­just­ment of the of­fi­cial ex­change rate from N306 to N380/$ to test the sus­tain­abil­ity of the pric­ing tem­plate be­fore the end of 2020.

“Not­with­stand­ing, the new pric­ing regime is ex­pected to em­place a more trans­par­ent op­er­at­ing model, stim­u­lat­ing in­vest­ment growth and en­cour­ag­ing the im­por­ta­tion of prod­ucts by Oil Mar­ket­ing Com­pa­nies,” Agusto & Co. said.

The rat­ing agency said the lock­down re­stric­tions im­ple­mented by the gov­ern­ment as part of an ef­fort to cur­tail the spread of the coro­n­avirus dis­ease af­fected the con­sump­tion of petrol sig­nif­i­cantly.

The re­port re­vealed that the growth of the Nige­rian oil and gas down­stream in­dus­try re­mained hin­dered by the lack of sub­stan­tial in­vest­ments, im­port con­straints, and reg­u­lated pump prices.

It said, “This is largely at­trib­ut­able to the dom­i­nance of the gov­ern­ment in the in­dus­try, par­tic­u­larly in re­la­tion to the im­por­ta­tion of re­fined petroleum prod­ucts.

“Over the years, the in­dus­try has en­joyed a sta­ble de­mand for petroleum prod­ucts as a re­sult of the sub­si­dies pro­vided by the gov­ern­ment. This con­trib­uted to the grad­ual crip­pling of gov­ern­ment fi­nances.”

Agusto & Co. noted that the Fed­eral Gov­ern­ment had taken pos­i­tive steps to fully dereg­u­late the in­dus­try, high­light­ing the re­cent re­views of petrol pump price.

It said, “The con­sen­sus medium- term out­look for the crude oil mar­ket is pos­i­tive, which im­plies that the price of petrol will be higher than the old reg­u­lated pump price in the near fu­ture.

“The pric­ing of PMS will con­tinue to be over­seen by the Petroleum Prod­ucts Pric­ing Reg­u­la­tory Agency through a pric­ing tem­plate. The new pric­ing tem­plate takes sev­eral fac­tors such as the petroleum prod­uct cost and the for­eign cur­rency con­ver­sion rate into con­sid­er­a­tion.”

Agusto & Co noted that no white fu­els were pro­duced at the na­tion’s re­finer­ies for the seven months from June to De­cem­ber 2019 due to on-go­ing re­ha­bil­i­ta­tion works.

Agusto & Co. also be­lieves that the con­tin­u­ous ef­forts of the gov­ern­ment to deepen the util­i­sa­tion of LPG in Nige­ria will con­tinue to bear fruit in the medium to long term.

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