A Review of the Nigerian Energy Industry

Petrol price reduction: FG considers increase in marketers’ margin

27 January 2014, Lagos – The Federal Government has reached an agreement with major oil marketers in the country’ for an upward review of traders/marketers margins in the sale of imported Premium Motor Spirit, PMS or petrol.

FUEL scarcity
Photo: Vanguard

Mr. ObafemiOlawore, Executive Secretary, Major Oil Marketers of Nigeria, MOMAN, who disclosed this at a press briefing in Lagos, said the Minister of Petroleum Resources has agreed to set up a committee to look at the dealers and marketers’ margin, with a view to addressing their grievances.

According to Olawore, over the years, marketers have been clamouring for an increase in their margins, without success, making it difficult for the oil marketers to meet their financial obligations, carry out expansion and upgrade programmes among others.

He said, “Since 2007, dealers and marketers margins have not been reviewed. It has been fixed at N1.75 per litre ever since, despite changes in workers’ salaries among others.”

He called for the quick payment of outstanding subsidy claims owed marketers, which he said has been mounting due to increase in the exchange and interest rates.

He also expressed concern that the Federal Government budgeted N200 billion for fuel subsidy, despite the fact that the amount owed oil marketers as subsidy in 2014 is about N250 billion.

“Because of the delay surrounding the payment of our subsidy claims, oil marketers have been having problems with accessing funds from banks to finance their operations,” he added.

He said some banks have threatened to stop funding oil marketers in respect of imported petrol due to difficulties associated with paying the interests on foreign exchange.

Continuing, he justified the new price of N87 per litre, saying that the devaluation of the naira, rising freight cost, non-functional refineries might be some of the reasons it is impossible for the price to go lower than N87.

According to him, if our naira had been stronger than it is currently, it would have been an advantage to the country in terms of the final cost of petrol.

However, he said, “This is the best time for the Federal Government to deregulate the petroleum sector, as this is what will help guide against all the issues currently propping up. When the sector is deregulated, any upward movement in price will be as a result of a joint consultation with key stakeholders, so as to prevent crisis.” He lamented the fact that, unlike in the past, oil marketers were not consulted before the new price was announced, adding, however, that the marketers will comply because the law does not mandate the Minister of Petroleum to hold consultations before announcing any price changes.

He noted that because marketers were not involved in the processes leading to the reduction was the reason why most of the petrol stations could not change to the new price 24 hours after the announcement.

He further stated that their refusal to comply immediately was also due to the fact that they were not sure if the reduction was from their margin or not, stating that if the reduction had been from their margins, they would not have been able to comply.

– See more at: http://www.vanguardngr.com/2015/01/petrol-price-reduction-fg-considers-increase-marketers-margin/#sthash.FegGpTmF.dpuf



– Vanguard

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