Indications emerged last night that the Federal Government is working frantically on measures aimed at ensuring that oil marketers in the country resume importation of Premium Motor Spirit, PMS, popularly known as Petrol, to achieve seamless storage, supply and distribution of the product across the country.
Following President Bola Ahmed Tinubu’s Inauguration Speech where he announced an end to the fuel subsidy regime and total deregulation of the sector, oil marketers had enthusiastically welcomed the development and commenced fuel importation, thereby breaking the monopoly of NNPC Limited as the sole importer of the product.
However as the foreign exchange crisis deepens, throwing Naira off balance, sending the local currency to an all-time low of 1000 to a dollar at the parallel market and the rising price of crude oil in the international market, it becomes virtually unsustainable for oil marketers to continue product importation at the current pump price per litre.
Last week, the Group Chief Executive Officer of NNPC Limited, Mele Kyari announced that owing to oil marketers’ inability to access foreign exchange, NNPC has once again become the sole importer of petrol.
With Naira on a free fall hitting the 1000 to the dollar mark in the parallel market, and a steep rise in crude oil prices, the landing cost of a litre by last week had risen to about N720.
With the current pump price of N620 per litre, industry analysts are in agreement on the fact that it is no longer realistic for oil marketers to bring in products while retaining the prevailing price unless the foreign exchange challenge is addressed as a way of bringing down the landing cost.
The Oil Marketers, led by the Chairman of Depots and Petroleum Products Marketers Association of Nigeria, DAPPMAN, Dame Winifred Akpani, along with the Major Marketers Association of Nigeria, MOMAN and other marketers Monday met with top officials of Nigerian Midstream and Downstream Petroleum Products Regulatory Agency, NMDPRA, to brainstorm over the challenges being confronted by the oil marketers and how to resolve them.
Impeccable Presidency sources last evening disclosed that the Federal Government is working at a number of short-term measures to enable oil marketers to access foreign exchange at a rate that will not cause serious dislocation in the price of fuel.
Said the source: “For strategic reasons, the details of these short-term measures will be kept off the public space for now. But rest assured that the government is not comfortable with a situation where NNPC will be the sole importer of the product as this will defeat the essence of the deregulation policy of the government.”
It was also learnt that the Federal Government, as a long term measure, is working on some fiscal and monetary re-engineering that will help to firm up the Naira, going forward.
Said the source: “Of course, it is obvious that the speculative exchange rate of 1000 to a dollar cannot be the actual value of the Naira. A multi-pronged approach is being adopted which will help to firm up the Naira and which, ultimately will enable the marketers to access the dollar at a rate that will not only be sustainable, but will also be profitable for them to import fuel to ensure seamless supply and distribution throughout the country. NNPC cannot be the sole importer of fuel in a deregulated market.”
Oil Marketers have consistently called on the government to establish a level playing field by giving oil marketers access to foreign exchange at the official CBN window to ensure smooth transactions and create opportunities.
Months back at a Press Conference, the Chairman of Depots and Petroleum Products Marketers Association of Nigeria, DAPPMAN, Dame Winifred Akpani, harped on the issue.
She said: “Without a level playing field, especially the one that guarantees access to dollars for all marketers at official rate, marketers’ ability to import petroleum products is continually and severely hampered as significant portion of their operations and critical operational and capital expenses are denominated in US dollars.”
Urging the government to consider the request a most urgent one, the DAPPMAN Chairman said further: “This is a passionate appeal to the government as we can confidently state that accessing foreign exchange rate through the CBN window will significantly enhance capacity and facilitate seamlesss supply of PMS and ultimately birth the regime of sustainability in terms of storage, distribution and supply across the nation.”
“Getting access to foreign exchange at official CBN window and paying for levies, fees in our local currency will markedly transform service levels and spur product availability to a new height across the nation, ” she submitted.
Sources close to the Monday meeting between the marketers and the federal government as represented by officials of NMDPRA said it was this same position that all the oil marketers in attendance pushed for.
Although the government has come up with a policy of floating the Naira thereby merging the official rate with the parallel one, leaving little margin, in principle, but the market reality is that the gap has continued to get wider by the day as foreign exchange scarcity gets more acute.
Presidency sources confirmed that the Federal Government will be coming up with initiatives that will address the issue of the foreign exchange frontally in the weeks ahead.
“The government has noted the request of the marketers. The foreign exchange conundrum is being addressed, even though the issue of crude oil price is not one the government can influence one way or the other. But the oil marketers must be back in business and their Depots must be filled with product.”