Category: Business / Economy

Some stakeholders in the Nigerian downstream oil and gas sector have expressed concerns about the inclusion of additional costs that were not originally included in their pricing template. They have singled out Stevedoring as one of the costs that were added without prior agreement.

According to the stakeholders, while stevedoring (the act of loading or offloading cargo to and/or from a ship) is a common practice in other sectors of the oil and gas industry, such as upstream and midstream, it cannot be accommodated in the downstream sector’s costing template at the moment.

Said one of the top Executives of an oil marketing company: “For the downstream business, which is where we are at, yes, the upstream business is slightly different. They run their transactions dollar-based. So I guess they can pay money in dollars. We (downstream players) run our transactions in Naira. Everybody knows that Premium Motor Spirit (PMS) is not deregulated yet; that is the truth, the reality. “

“So given the restriction there, it even makes it difficult to accommodate any other cost that is not within that pricing structure. The pricing structure is clear. It talks about vessels. It talks about anything that has to do with your vessel’s activity. It is specific. If you log on to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) and Petroleum Products Pricing Regulatory Agency (PPPRA) websites, you will see that there’s nowhere where stevedoring is mentioned,” added this stakeholder.

He noted further: “When they start to introduce those things into that cost structure, then we are unable to sell, or rather, it’s either you are selling at a loss because you are including costs that are not in regulated templates, or you can’t sell within the limitation of the regulated price.

I don’t know; sometimes I feel as if a lot of these things are done due to a lack of knowledge. So if you give Stevedoring to the upstream companies, their system is robust enough. It has a deregulated structure.

But we should always know that you can’t be saying you want us to reduce costs and, on the government side, keep increasing them. So yes, there’s an act guiding it.”

Given the prevailing uncertain situation,  downstream sector stakeholders are calling on the Federal Government and regulatory agencies like Nigeria Ports Authority (NPA) and Nigerian Maritime Administration and Safety Agency (NIMASA) to involve major stakeholders before making rules and signing such policies and initiatives into law.

“First, the government should engage the stakeholders; people shouldn’t sit where they sit and just make rules around things they know very little about. So it is not just about what the downstream sector wants. Let’s engage so that you better understand our business”

He added, “At this point, with where we are with petroleum product in this country, Stevedoring should not be applied to us. Stevedoring is in dollars or cents per litre. You don’t denominate your business in dollars because whatever we sell, we sell in naira and kobo. So, you can’t apply the same laws that you apply to upstream or midstream to downstream. That’s why I said that there’s a lack of understanding.

So the first thing to do is to engage the stakeholders in that sector. When you engage, then we can make a decision. For us, the decision is that they need to take stevedoring out of our costing template. We can’t apply it as we speak.

We need to talk about it. Do you understand our business? Let us describe what we do to you, and when we describe it, the resolution will be clear. As we have said, you can’t apply stevedoring to the downstream sector.”

“The authority in charge of stevedoring is the NPA, and they are part of the government. We have to engage them extensively, and like all government parastatals, they do not listen; they just stick to the fact that it has been gazetted and is law,” a concerned stakeholder noted.

Meanwhile, the Maritime Workers Union of Nigeria, (MWUN) had in August said the level of engagement of indigenous Stevedoring firms on oil platforms across the country currently stands at 60 percent.

President General of MWUN, Comrade Adewale Adeyanju while speaking with newsmen said that most of the multi-national oil companies are beginning to engage stevedoring contractors.

Adeyanju, also said that although the NPA was yet to disclose the number of IOCs that are complying, there has been a steady increase in the level of compliance.

“The level of compliance by the IOCs on the engagement of Stevedoring companies has reached 60 percent. The once powerful multi-national companies are now engaging Stevedoring companies.

And the Nigerian Ports Authority, has not been able to tell us the number of the IOCs that are complying, they should tell us how these IOCs are obeying the Stevedoring extant laws. The bulk of the matter lies with the NPA “.

Continuing, he adds, “For the Union, they have seen our reactions, if ExxonMobil, Texaco and those big multi nationals engage the services of Stevedoring contractor appointed by the NPA, the level of compliance will be getting better “.

Oil Industry watchers, however, posited that while OICs and other players in the Upstream and Midstream Sectors of the Oil Industry need to sign on to the Stevedoring Regulations, the same cannot be said of the downstream sector players who operate in peculiar circumstances where their businesses are denominated in local currency, Naira, in addition to the fact that such extra costs to be incurred could either lead to a hike in fuel prices or irrecoverable additional costs to the operators in the sector.

In the midst of despair, there is a beam of hope once again as Nigeria goes on green with the launch and distribution of Compressed Natural Gas (CNG)-powered buses nationwide from this week, to ease the transportation challenges brought about by subsidy removal.
This is not only a dream come true but a fulfillment of an agreement resulting from the signing of the Memorandum of Understanding (MoU) by the federal government with the organized Labour on October 15, 2023.
Recall that the federal government had agreed to vote N100 billion for the provision of high capacity CNG buses for mass transit in Nigeria as part of the deal to ameliorate the pains of fuel subsidy removal. Besides, Provisions have been made for initial 55,000 CNG conversion kits to kick start an auto gas conversion programme, whilst work is ongoing on state-of-the-art CNG stations nationwide. Already, the roll out programme commenced in Lagos a few weeks ago and so far seven CNG conversion centers have been established in the country.
More than 1,000 of such centers will be opened nationwide in the next few years, with 55,000 conversions planned under the palliative programme that has kicked off, designed to reduce the cost of transportation, especially mass transit for poor Nigerians while creating over 2,000 jobs, converting vehicles from PMS to CNG Bi-fuel that runs cheaper, cleaner and better.
What this means is that, in a few days to come, Nigerians shall begin to see CNG powered vehicles on the roads.
This brought to bear the promises made by the President, Asiwaju Bola Ahmed Tinubu on October 1, 2023. In his broadcast to the nation, Tinubu declared deployment of CNG buses nationwide with a target of one million on the roads by 2027.
According to the Programme Director of the Presidential CNG Initiative, Michael Oluwagbemi, conversion to CNG buses holds importance for Nigerians and the global shift towards responsible energy selections. This, he said, extends a hand to a greener, more sustainable and affordable future.
“We are not just changing how we fuel our vehicles; we are changing lives, one job at a time”, he echoed
CNG-powered mass transit buses would help Nigerians save two-thirds of transportation cost, and also promote the use of CNG as an alternative to petrol. This in return will cut down the cost of transportation across the country.
The Special Assistant to the President on Special Duties and Domestic Affairs, Toyin Subaru, puts it succinctly : “We are going to develop an app that will enable you to locate where a CNG station is located. We should be able to buy gas for our cars at N230 per kg as against the cost of petrol which is N680 per litre. This should help every Nigerian save about two-thirds of their transport cost.”
“Our goal in the presidential CNG initiative, as stated by the President in his October 1 speech is to make 55,000 conversion kits immediately available to the Nigerian public so that we can begin to jumpstart the CNG revolution. The palliative programme as described by the President will last until March 31, 2024. So, technically speaking, we are expected to roll out 55,000 within that time frame”, he stated
In a few days too, the fleet of CNG powered buses promised by Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) will arrive. The buses which were assembled locally, to reduce pressure on forex, will also provide a lot more jobs for the teaming populace. Sources close to the Association hinted that the CNG powered buses, already delivered to Abuja, may be commissioned by the President any moment from now.
Analysts have urged top players in the organised private sector to emulate the DAPPMAN example in strongly supporting the federal government’s clear determination and commitment to reduce the exasperating effect of subsidy withdrawal on the people .
They are of the view that Nigerians may begin to see, even in a short time, the price of CNG crashing to N230 per kg and consequently, crash transportation cost.
This, however, gives credence to the fact that the government is not left alone in cushioning the effects of fuel subsidy removal. This will lead to less pressure on PMS or Petrol and brings down the price locally.
The good news is that the federal government has not stopped at that. The $10 billion foreign exchange pumped into the money market has started yielding some impact on the economy as the Naira is gradually regaining its strength against the dollar which exchanged at N900 to a dollar on Monday. This was against N1,250 to a dollar in the previous week.
This invariably will encourage the oil marketers to return to the business as they have access to foreign exchange which had become an albatross to stable supply of fuel into the country in recent times.
It is also anticipated that with access to foreign exchange, a level playing field will be created in the industry while also encouraging a competitive market as more players enter the market . This will in return create more employment opportunities for the youths in the country.

When Tuesday October 30, 2023, President Bola Ahmed Tinubu wrote to the Senate to seek approval for N2.18 trillion Supplementary Budget, he did not mince words in pointing at the urgency of the matter at issue.

Urging the Senate to “speedily” approve the budget, it was obvious, even to the law makers that the matter at hand requires expeditious attention.

And at the heart of that request, requiring speedy attention is the implementation of the 15-point Memorandum of Understanding, MOU, signed by the government and Labour Unions Leaders on October 3, 2023 in Abuja.

The agreement includes the Federal Government approval of a wage award of N35,000 to all Federal Government workers beginning from the month of September pending when a new national minimum wage is expected to have been signed into law, suspension of collection of Value Added Tax (VAT) on Diesel for six months beginning from October, 2023.
Federal Government also agreed to vote N100 billion for the provision of high capacity CNG buses for mass transit in Nigeria. The Federal Government also agreed to pay N25,000 per month for three months starting from October, 2023 to 15 million vulnerable households, including pensioners, commitment on the part of the federal government to the provision of funds as announced by the President on the 1st of August broadcast to the Nation for Micro and Small Scale Enterprises. The MSMEs beneficiaries should commit to the principle of decent jobs.

The situation today is that the federal government, in a bid to stave off disruptive labour unrest, has commenced the implementation of the MOU.

The Supplementary Budget which the President sent to the Senate on Tuesday requiring speedy treatment was in a bid to appropriate the needed funds for the implementation of critical aspects of the MOU.

In that N2.18 trillion Supplementary Appropriation is the sum of N210 billion for the agreed wage award and another N400 billion for Cash Transfer to vulnerable households, while another N200 billion is for Seed and Agricultural Inputs and Equipment

Just last week Friday, seven CNG Conversion Centers were inaugurated with more coming up across the country, according to Zach Adedeji, Chairman of the CNG Conversion Committee, while two CNG buses were handed over to Olusesan Adebiyi, the State House Permanent Secretary, at the presidential villa, Abuja.

Provisions are also being made for initial 55,000 CNG conversion kits to kick start an Auto Gas Conversion Programme.

On Refineries, the Presidential Committee had visited the Refineries, ascertained their rehabilitation status and assured the nation that Warri Refinery and Petrochemicals would resume pumping of fuel before the end of the year.

In listening to the yearnings of the Academic Staff Union of Universities (ASUU), the President , Bola Ahmed Tinubu, last week approved a partial waiver of the “No Work, No Pay” order on members who participated in the last 8 months long strike and ordered the release of four months of their withheld salaries.

In a similar vein, in commemoration of the 2023 International Day for the Eradication of Poverty last week, President Tinubu launched the disbursement of N25,000 to 15 million households for three months as a social safety net.

To complement the efforts of the Federal Government and avert a face off with Labour is the commendable moves by some private sector players as exemplified by the Depot and Petroleum Products Marketers Association of Nigeria, DAPPMAN, an Association that threw its weight behind the government’s decision to end the subsidy regime and to deregulate the downstream sector of the oil industry. DAPPMAN, leading other oil marketers, are now ready to donate a number of CNG buses to the federal government to help mitigate the effects of petrol subsidy removal.

According to DAPPMAN chairman, Dame Winifred Akpani, the donation is to support the federal government’s post-subsidy palliative measures.
She said: “We collectively agreed that we’re going to work at providing real mass transit buses that work. The ones that run on CNG, which is a compressed natural gas and diesel interchangeably,” the DAPPMAN Chair said.

For this marketers’ association, it is walking the talk. DAPPMAN had been in the forefront of the calls for the removal of fuel subsidy affirming repeatedly that it will put an end to fuel scarcity, eliminate unnecessary hardship on Nigerians seeking to buy fuel, reduce waste and stimulate responsible consumption of this petrol .

Now that the federal government has yielded to the calls and abolished the subsidy, DAPPMAN has also taken the lead in support of government’s bold and creative actions towards cushioning the harsh effects of the subsidy termination.

Another good news is that of the planned injection of fresh $10 billion into the Nigerian economy in the coming weeks. This, the Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun says would provide the much-needed relief to a liquidity squeeze that has been adversely affecting the Naira.

He emphasized that the substantial inflow is expected to play a significant role in bolstering Nigeria’s economic stability and alleviating the pressures on the national currency.

It is also anticipated that the fresh inflow will help to open the official forex window to oil marketers to accelerate their quick return to business and begin fuel importation to help stabilise fuel supply and distribution.

Other experts have added that government should look into streamlining the cost of importation of fuel by charging the taxes in local currency. This, they insist, will reduce the cost of fuel import and further help to reduce the price of fuel for Nigerians thus complementing government’s much needed efforts in this direction.

Other efforts by the government to boost forex inflow is the $3bn emergency loan the Nigerian National Petroleum Company Limited (NNPCL) secured from Afreximbank.

An analyst said: “Goldman Sachs is an external asset manager to the CBN, so using NNPC’s account that CBN manages with Goldman as an unsecured credit line to tap $10bn for the purposes of clearing outstanding forwards and stabilizing the exchange rate back to the N800 range is plausible,” he said.
“This means that Goldman Sachs will net off gas revenues from WAGPCO and NLNG over an extended period to repay back.”

This approach, which involves an upfront cash loan against proceeds from a limited amount of future crude oil production, was used by the NNPCL to secure the $3 billion emergency loan from Afreximbank.

With all these proactive measures aimed at meeting the agreements reached with labour and to reignite the economy with the ultimate objective of engendering economic growth and alleviating poverty, the contention out there is that the labour/government face off is about to be resolved for the benefits of all Nigerians.

Said Olusesan Ige, an Abuja based Media Content Creator: “The fact on ground today is that the federal government has shown good faith, good intentions, it is obvious, even for the Labour also to see. The issue of ultimatum no longer holds. I think labour will sheath the sword now that all their requests are being swiftly attended to.”

…Supplies dry up as NNPC ration fuel to depot owners, leaving marketers with acute product shortage

Following our story on NNPC L’s warning regarding panic buying of fuel by Nigerians, some stakeholders  have  reached out to us to give  further  insight into what is currently happening to  fuel supply  in the country  which NNPCL is the sole importer to the country

According to the stakeholders the noticeable emerging queues in many fuel stations may soon spread throughout the country and may soon become even more intense as oil marketers can no longer replenish their fast-depleting stocks.

The noticeable emerging queues in many fuel stations may soon spread throughout the country and may soon become even more intense as oil marketers can no longer replenish their fast depleting stocks.

Investigations by our reporters revealed that NNPC Limited,  now the sole importer of petrol has drastically reduced fuel supply to Depot owners, thereby leaving independent marketers who rely on the Depot owners for their supplies stranded.

According to highly reliable downstream industry sources, NNPC, for reasons that are not yet clear, has now adopted a policy of supplying product to only depot owners with at least 50 fuel stations.

Although weeks back, NNPC Group Chief Executive Officer, Mele Kyari claimed that there was no need to panic as there was enough stock, in excess of 1 trillion litres, industry players are today troubled by the fact that NNPC now focuses its full attention on supplying products to only its retail outlets.

Further investigations show most retail stations in the country may run out of fuel supply in the days ahead as only about 60 percent of the Depot owners have up to 50 retail stations, which is the NNPC new criterion for being eligible to be supplied product.

Said a source: “What we face now is an imminent collapse of the sector and a return to an era of acute fuel shortage with the attendant disruption to socio-economic life.

“With Depot owners not able to import product owing to shortage of dollar and now NNPC  which earlier claimed to have enough stock not supplying to most marketers, you can imagine what the supply situation will be in the days ahead.”

Hardest hit by this latest unpleasant development are the independent oil marketers who have filling stations scattered all over the country, but rely on Depot owners for their supplies.

“If the independent marketer with two or three stations in some strategic remote areas of the country cannot get supply and the big players can also not receive supplies from NNPC and with NNPC not having enough retail outlets to meet the fuel needs of Nigerians, it is obvious that we are returning to the era of serious fuel crisis”, the source added.

Industry operatives last night called on the federal government to take the NNPCL up on the actual fuel stock and supply situation in the country as the the company appears to have challenges beyond what it may be admitting in public.

“If indeed there is enough stock as NNPCL claimed weeks back, and realising that the Depot owners are now handicapped and unable to import because of the challenges of forex, what then will inform its decision to be rationing fuel at this critical point in time? NNPCL needs to come clean on this serious issue.” An oil marketers Executive noted last evening.

From all Indications, the federal government will have to move fast by either fast tracking its strategies of easing the forex crunch to enable Depot owners resume fuel importation or compel NNPC to flood the market with the product, if truly it has enough or both.

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.”