02 August 2016, Lagos — Deregulation of the downstream petroleum sector appears to be affecting the petroleum products previously enjoying subsidy differently.
While impact has been positive for premium motor spirit, PMS, also called petrol, which pump price is now falling due to dwindling demand, the same cannot be said of Dual Purpose Kerosene, DPK, which is now out of the reach for the common man.
While consumers try to maximise the benefits of the drop in the price of petrol, the ordinary Nigerians resort to falling of trees for firewood and buying of charcoal to meet their domestic energy needs, thus increasing concerns for environmental hazards and health safety.
Petrol price hike
A few months after the Federal Government increased the pump price of premium motor spirit, PMS, popularly called petrol from N86.5 to N145 per litre, prices have begun to ease a little as market forces come into play.
Sweetcrude investigations revealed that a number of filling stations, especially those operated by the independent marketers have reduced their pump prices to as low as N143 per litre.
However, some marketers argue that the price slash in some outlets is not so much of market forces, but more of cash crunch and low demand occasioned by the current economic recession
Corroborating the development, the Group Chief Executive Officer, Forte Oil Plc, Mr Akin Akinfemiwa, recently lamented that the market has witnessed a drop in demand of up to 50 percent since the price hike.
Akinfemiwa, who is also the chairman of the Major Oil Marketers Association of Nigeria, MOMAN, noted that motorists have devised various means of using less petrol in view of the high cost.
According to him, a survey conducted by his company revealed that many motorists had resorted to various journey-planning initiatives to reduce fuel usage, and identified some of them to include “carpooling, use of government mass transit buses and even cutting down on unnecessary movements and visits.”
At Iyana-Isolo, Sheflex petrol station, which sells petrol at N143 per litre, one of its attendants, who refused to be quoted,said: “We bought the product at a lower rate. That is why we are selling at the current amount. As you are aware, everyone is sourcing for their product.”
At the NIPCO station, Fadeyi, Ikorodu Road, also sell at N143/litre, an attendant who identified herself as Blessing, attributed to drop in pump price to lower demand, saying, this is business ‘the lower the demand, the lower the price.” but she added that recent strategies adopted by NIPCO, have improved patronage.
Similarly, at an NNPC filling station at Ikeja, where the product has been pegged at N143/litre since the deregulation, one of the attendants who preferred anonymity disclosed that sales had fallen significantly.
According to him, “We can count customers that come in to buy petrol these days, which was not the case before now. But, I can’t blame them because of the difficult times. Formerly, we sold an average of 35,000 litres daily, but these days we sell lower than that.”
Corroborating the poor sales, another major marketer, who also pleaded for anonymity told Sweetcrude, “Some of us who used to sell between 120,000 litres and 150,000 litres (the equivalent of four trucks) daily are now finding it difficult to sell 33,000 litres daily. The business is not encouraging anymore because we do not have enough margins as competition has driven the price down.”
He even blamed the NNPC for also encouraging the price fall, saying: “Because NNPC has stake or interest in some of the private depots, they are giving them at cheaper rates.”
But not many motorists are convinced about the price drop, as many suspect that some of the marketers may have tampered with their meters to indulge in sharp practices, especially under-dispensing, to make up for the loss of the revenue.
A motorist, who identified himself as Mr Phillip Gbamuloye, told Sweetcrude, “Though the price seems to have reduced by N2, it is not indicating any change in my tank gauge. I bought 30 litres but my tank is still at reading half tank, but it should have been higher than that.”
But another motorist, Mr. Segun Akinola, insisted that he got the right quantity of product he paid for from a filling station close to his house at Ipaja.
According to him, “I normally take the precaution of buying my petrol in jerry can whenever I notice a pump price reduction so as to be certain of the quantity the meter is dispensing.
Consumers cut costs
Some Nigerians who shared their experiences with Sweetcrude decried the harsh economic condition in the country and the high costs of some petroleum products, which they admitted have forced them into being more cautious in buying fuels.
A Lagos State public worker, Mrs. Janet Peters, confided that “Before now, my husband and I usually went out with our respective cars.But with the current realities and petrol at N145 per litre, we cannot afford such luxury anymore. So, we have decided to be going out with one vehicle instead of two.
“The cost of fuelling both cars is very high, and that will result in ‘home recession’ if we are not careful. Presently, virtually prices of everything and all commodities in the market have gone up, including school fees and food stuff. If one does not apply basic economic principles, it will be a disaster.”
For Mr. Titus Onoriode, a banker, “Desperate situations in the country demand desperate measures. For the time being, I have resolved to be sleeping without running my generator throughout the night, which was not the case before the petrol price increase.
“I am also rationalising movements with my car. In a week, I drive to the office three times and the remaining days, I hit the road on commercial transportation.
“This is because whenever the bills come in, it is always frightening because the income cannot sustain all the past ‘ecstasies’. We are hopeful that the economy will bounce back again and everything will become better than what we have now because it is burdensome for Nigerians.”
Deregulation at play
However, MOMAN and the Independent Petroleum Marketers Association of Nigeria, IPMAN, described the price reduction as one of the benefits of deregulation.
The Executive Secretary, MOMAN, Mr. Femi Olawore, argued that apart from lower demand, the price would have dropped even further but for foreign exchange, forex challenges, which is hampering products importation.
According to him, “This price reduction is the beauty of deregulation, that is, competition. Also, demand has dropped; all the many trips that we were making to our villages have reduced drastically. That is the reality.
“Recall that we had earlier said that deregulation will not mean more increase in the price of petrol. This current development is coming despite the unavailability of forex by the government. If there was forex to buy and we are buying and importing heavily, the prices would have dropped even more a long time ago.”
Also speaking, the National President, IPMAN, Mr. Chinedu Okoronkwo, insisted that “There is no sticking to price. You sell what you get. That is why it is called deregulation. The only thing is that government said they have a cap and within that cap, you can revolve. It is not mandatory that you must sell at N145 per litre.
“If the price of petrol is coming down, then Nigerians should be happy because, by the time real competition comes in, the price will go downwards beyond the N2 currently in play. This is because, when a lot of people import the product, you begin to see a marginal price. The system will begin to see a new trend and new lease of life.”
He further argued that marketers’ agitation was not for a price increase. “We had not fought for an increase in the price of petrol, but have asked that the market should be open and people should bring in their products and not necessarily, waiting for government (NNPC) to buy before you can get the product.”
Kerosene now for the rich
But as petrol price is falling, the price of kerosene is heating the roofs, as Kerosene is now being sold for between N250 and N350 per litre depending on the location and outlet. The situation is further compounded by the scarcity of aviation fuel, as kerosene is used both as household and aviation turbine kerosene or Jet A1.
The scarcity of kerosene is so bad that even the industry regulator, the Department of Petroleum Resources, DPR, confirmed to Sweetcrude, that it rarely cleared vessels bearing the product these days.
The agency attributed kerosene scarcity to the shortage of FOREX, as banks are unable to raise letters of credit, LCs for importers and marketers to bring in the product.
Succour is underway
However, IPMAN reiterated members’ commitment to providing a robust supply of kerosene in the coming weeks, even as MOMAN decried the impact of the lack of FOREX on imports.
According to Olawore, “We didn’t just increase the price of kerosene on our own, but FOREX did. You cannot get forex at the government approved or official rate of N294 to $1. You cannot get FOREX at N300 or even N350. So, if you get the product above N350, will you sell below your cost to meet the ordinary man’s demand? Businesses are not run as a charity.”
With regard to making the product more available as promised, Okoronkwo assured that IPMAN “have begun talks with the majors in the oil and gas industry to collaborate with us and bring in the product that will cushion the price hike and help the masses.
“Recently, we had a meeting with majors in the industry who are in our fold and by the time we are done (in a matter of weeks), we would flood the country with kerosene. It will be in weeks because the ships have to leave their destinations. But we need to pay them now. Those are the factors that will make it get to weeks.”
He disclosed that IPMAN had been given a license to import kerosene and diesel into the country, adding that it had also concluded agreements with the foreign partners to finance the importation.
“Having given IPMAN the license to import kerosene and diesel, it would ease the sufferings of Nigerians, and in a couple of weeks, the products will be available at affordable price,” he added.
“We have entered into a partnership with some multinationals to assist the Federal Government to make petroleum products available in the country.
*Ediri Ejoh & Iloaze Blessed-Odidi – Vanguard