The recent disruptions in the supply and distribution of Premium Motor Spirit(PMS), also called petrol that led to scarcity and emergence of queues at petrol stations in Lagos, Abuja and other parts of the country, may intensify as crude allocation to the Nigerian National Petroleum Company Limited(NNPCL), to sustain its Direct Sale of Crude Oil and Direct Purchase of Petroleum Product (DSDP) to ensure sustained product supply in the country faces new challenges.
LEADERSHIP investigation revealed that the recent shortfall that led to the fresh crises has to do with inability of the NNPCL, to sustain the crude swap deal leading to decline in exchange with white products.
A competent industry source said the company has concealed the real situation but there was inadequate supply which he said resulted in the shortfall.
Our source revealed that due to declining crude production, crippling crude price at the international market and extensive government borrowing, the federal government had preferred to put on sale more crude volume to raise more money to operate and carry out key responsibilities.
Recently, a group says Nigeria’s current frightening and explosive borrowing is raising concern among non state actors who have mobilized resources to engage other stakeholders to action initiatives that will help neutralise imminent fiscal crises.
Based on the borrowing, the Civil Society Legislative Advocacy Centre (CISLAC), a non-profit, advocacy, information sharing, research body and her partners have launched a research product that centers on revealing and challenging the role of private creditors in hindering people’s recoveries to enhance the urgency with which the international community must address sovereign debt crises.
The research was commissioned with support from Christian Aid, to fully highlight the Nigerian context and dimensions of the indebtedness to private creditors for policy options and deliberate efforts to ending it.
It aims to contribute to an international financial architecture and macroeconomic environment that enables the fulfilment of human rights and the undertaking of climate action in economies that center on care.
Speaking in Lagos while interacting with the media, Auwal Ibrahim Musa (Rafsanjani), Executive Director of CISLAC, believed that the timing is auspicious to intensifying the urgency for adequate responses by relevant actors within the debt financing ecosystem that will contribute to cushioning this worsening economic crisis.
Musa, observed that Nigeria appears to be heading towards a debt crisis, with inevitable human costs.
There are implications for this rising debt stock in Nigeria with total external debts amounting to about $40billion and a private credit composition of $15.9billion which represents 39.8 per of total external debt stock, he said with Eurobonds taking the bulk of the commercial loans with a total portfolio of $15.62billion.
Corroborating our source, an Independent Consultant and former executive director of the NNPCL, Bello Rabiu, yesterday, during his presentation at a Webinar organised for the media by the Major Oil Marketers Association of Nigeria(MOMAN), questioned the integrity of the DSDP.
Rabiu also raised the issue of lack of transparency, calling on the company to make public the volume of crude being exchanged in the exercise.
According to him, “the Operating Model of NNPC’s downstream businesses arguably has contributed to a difficult investment climate for the private sector and made NNPC the single importer of PMS, limiting the space for competitive market.
Recalling the model operated prior to the signing of the Petroleum Industry Act (PIA) into law, Rabiu said, “Unavailability of dollars to Oil Marketing companies at the official CBN FX window while NNPC imports all its products at the official exchange rate of N360 per US$
inability of PPPRA to continue publishing the monthly guiding prices for the deregulated products has created confusion as to which exchange rate should be used for the importation of Petroleum products.
“Non compliance with the PPPRA regulations on monthly guiding prices for PMS; PPPRA renege on its responsibility to monitor the market and advise NNPC and other marketers on the appropriate guiding prices of PMS on a monthly basis
Insufficiency of market and industry information that would allow all importers and consumers to understand the basis for any change in price.”
He added that, “the PPMC Ex-depot price is now the only basis for pricing PMS across the nation. Nigerians would therefore have to pay for any inefficiency associated with the monopoly supplier.”
Rabiu said, a review of the current legislation and institutional arrangements establishes gaps which include conflicting provisions with respect to who has the power to fix the prices of petroleum products.
He said further that, “the Petroleum Act, 1969, Price Control Act of 1977, Petroleum Equalization Fund Act and Petroleum Product Pricing Regulatory Agency Act, 2003 all have varying provisions and powers on Petroleum Products Pricing
PPPRA has the power to ‘determine the pricing policy of petroleum products.’
“Whilst not as explicit as the previous legislations, the PPPRA Act, empowered an additional agency to settle prices of petroleum products. Indeed, as a matter of practice, PPPRA has been determining the prices of petroleum products in the recent past through its pricing template.”
According to him, “in the current context, It is difficult to establish the true cost of PMS importation into Nigeria; When PPPRA were announcing the monthly guiding prices, the agency claims that the pricing template it published takes into account FOB cost, freight, trans-shipment cost, statutory and admin charges (NPA, NIMASA, PEF, etc), storage charges, financing costs, foreign exchange rate together with generous distribution margins for the Oil Marketing Companies, transporters and Retailers.”
He said, the NNPC as the sole importer of PMS is utilising its domestic crude oil allocation to import PMS under the DSDP arrangement, thus, benefiting from unrestricted access to FX at official rate of N360 per US$, while the marketers would end up with a higher landing cost that is at least 25 per cent higher than NNPC’s if they procure FX at N480.
However, following the ultimatum by the Director of State Services (DSS), the NNPCL last Thursday announced the release of 1.9bn litres of Premium Motor Spirit ( PMS) for distribution nationwide.
The DSS had given the NNPCL and oil marketers a 48-hour ultimatum to make PMS known as petrol, available for Nigerians.
But our source said, given current NNPC current incapacitation, the nation may recline into same situation it found itself in the last three weeks.
A clarification sought by our Correspondent from the NNPCL spokesman, Garba deen Mohammed, was not responded to as at the time of filing this report.
Meanwhile, the federal government said, it would continue to work hard to meet its Organisation of Petroleum Exporting Countries(OPEC) crude oil production quota of 1.8 million barrels per day by the end of May 2023.
Minister of state for Petroleum Resources, Chief Timipre Sylva, disclosed this a day after OPEC agreed to maintain its production cut among member countries to maintain market stability.
Sylva said, the federal government would continue to improve security along the tracks of the major crude oil pipelines and block every leakage through which oil was stolen by thieves and pipeline vandals.
He said the inability of Nigeria to meet the current OPEC quota was not due to lack of production capacity on the part of crude oil producers, “but because a lot of producers decided not to inject into the pipelines as they were losing a lot of their production when they inject into the pipelines.”
A statement by the minister’s Senior Adviser Media and Communications, Horatius Egua, further quoted Sylva as saying, “Once we are able to build enough confidence in the security of the pipelines, they (producers) will then be able to inject into the pipelines once again.
“And once that happens, we will be able to meet up with our OPEC quotas. That is where we are going and the early signals are there that we are making very good progress.”
The minister noted that with the rehabilitation of the Port Harcourt and Warri refineries, as well as the planned repair of the Kaduna refinery, and the coming on stream of the Dangote Refinery, Nigeria was sure of guaranteed crude oil production that would ease the incessant fuel crisis faced across the country.
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