27 January 2016, Lagos – Private and independent oil marketers have accused the Petroleum Products Pricing Regulatory Agency, PPPRA, of encouraging a monopolistic system in the downstream petroleum sector run by the Nigerian National Petroleum Corporation, NNPC, and major marketers.
According to the independent marketers, current downstream operation, especially as regards refined petroleum products is fraught with a lot of irregularities tending toward monopoly.
Contentious issues: Among the contentious issues in the new PPPRA pricing template include: PMS sales losses, NNPC’s monopoly of the household kerosene, HHK market, and higher than stipulated ex-depot price of automotive gas oil, AGO also called diesel at Pipelines and Products Marketing Company, PPMC, a subsidiary of NNPC.
Expatiating further, an independent marketer, who spoke in confidence, told Vanguard on the telephone that “the new pricing template for PMS is unrealistic as almost N9/L had been cut off,” adding that the situation will entrench scarcity and other sharp practices if not checked. Recall that Vanguard had exclusively reported last week that independent depot operators had complained of similar losses of at least N7/L on the new pricing.
Our source continued: “At N86.50/L under the new PPPRA template, a marketer will lose about N320million per 30,000 metric tonne PMS i.e. 36 million litres x N9/L.”
PMS import: With regard to the importation of PMS, the source maintained that “Anybody who wants to import will lose N2/L at ex-depot price of N76/L because of the ports, shipping and finance charges. The PPPRA template puts these charges as NPA (N0.36), and finance (N0.20).
Also, he noted that the lopsided PMS import licence award for first quarter, Q1 2016, further compounds the situation, as out of the over 60 depots across the country operated by NNPC/PPMC, majors, independents and private operators, only 15 were given import permits.
While NNPC/PPMC got 78 percent of the allocation, the rest of the marketers got only 22 percent. Out of the 15, the marketer expressed doubts about the ability of five of the awardees being able to import petrol due to difficulties in accessing foreign exchange.
Recall also that Vanguard had reported that foreign suppliers are shunning Nigerian marketers except their transactions are backed by dollar cash.
In view of the foregoing, the independent marketer argued that “products’ marketing is now tending towards monopoly. The Federal Government says it has no forex to use for products import and now doing trade by barter through crude swapping – crude for refined products, which does not involve forex.
“When you look at the import permit, they gave 22% allocation to private operators and 78% to NNPC. But they give forex to NNPC at official rate of N197 – $1, and ask the others to go source for forex independently at the open market at N300 – $1.
“Both the NNPC and the private operators will still come to the same market and expected to sell at the same price. This just can’t work, because there is no basis for competition. NNPC is obviously at an advantage over the rest of us. This is the same reason why products scarcity will continue.”
Besides, he noted, due to the huge exposures to banks running into billions of Naira, the marketer maintained that soon there will be more job losses as private operators are run out of the system on account of the harsh economic environment.
He added that even the operators who maintain foreign accounts cannot use their dollar for the transaction, saying: “If you have forex abroad, you still need CBN permit to use it to buy product, and this permit takes up to one month before you get the approval.” He therefore urged government to allow NNPC to do massive crude swapping and bring in more products to meet national demand, as “the current template will lead to many sharp practices including high cost, under-dispensing, diversion of products and even adulteration.”
In the area of kerosene, which was previously under regulation like petrol, our source revealed that the product has been deregulated under the table. And even at that, only NNPC/PPMC sells the product. In confirmation, there is no kerosene template on the PPPRA official website, as the site simply put “updating…,” where the price template should have been.
However, Vanguard was able to gather some of the cost input for Kerosene from a graphical representation of all the products on the PPPRA website, which put the expected open market price at N72.28/L as shown in the table below. With regard to AGO, which had long been deregulated, Vanguard gathered the open market price of N70.76/L indicated on the PPPRA’s template is at variance with what our source revealed that the PPMC’s ex-depot price is N95/L, while open market is N115/L and above.