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Many fuel depot owners can’t service loans – MOMAN chairman


Image result for Many fuel depot owners can’t service loans – MOMAN chairmanWhat I will say is that obviously, energy security for any country is a laudable goal. You have to be energy-secured because at any time, anything can happen. I will not say we are fully there as a country yet but a lot is being done to take us to where we need to be, both government and private sector. But I think, ultimately, what will help is if the enabling environment is created to make sure that all the investment that is needed to take us to that level can be encouraged.

Energy security has to do with fuel supply, power supply, use of renewable energy and many other areas. Work is being done but we are not where we need to be.

There have been calls for full deregulation in the downstream oil sector. How do you think the government should address this major issue?

The truth of the matter is that it is not an easy subject because obviously there are political ramifications. If it was easy, it would have been done a long time ago. I think people are so used to paying a relatively cheap price for petrol in Nigeria; so, to change that situation, people really have to be convinced that whatever savings made will be put to good use. In many cases, people see that as the only benefit they are getting by having cheap fuel. So, that makes it a very hot political issue. But for me, the step will be to have a plan or goal, that this is our objective: We want to deregulate – we want to get away from this – and then, you start working on the plan even if it is five years to when you get there; you start doing it gradually step by step, giving confidence to the population.

The problem we always have is that nothing is done for a long time; subsidy continues to rise, government resources cannot tackle it and then one day, suddenly, government just increases price by a huge amount and then people react. I think what needs to be done is something that is gradual. Something that people can say, “Okay, the goal is maybe in five years, we will be fully deregulated and we will go step by step.’ Government puts measures in place to make life easy for the population. So, what is really important is to have a plan.

But what we are doing now looks like we are just running away from what is really supposed to be where we should go to. All the countries around us are deregulated; the prices are much higher than what we have in Nigeria. So, as Mr Henry Ikem-Obih (NNPC Chief Operating Officer, Downstream) confirmed, some of our products are finding their way across the border; so, we are subsidising and yet some of the products are going to other countries. Apart from that, the money involved is so much, running into N1tn every year. Imagine what that can do for education and healthcare in the country.

If we factor all those things in, I’m sure working with all stakeholders, we can come out with a useful plan and we, as MOMAN, are very willing to work with government to develop such a plan, so that we can get to where we need to be.

How much is the subsidy arrears owed to marketers by the Federal Government?

First and foremost, we must commend government today because it has done a lot to substantially reduce this subsidy outstanding. These debts were not incurred during this administration but they have done a lot to bring down the debts. So, whatever is still being owed to marketers is certainly much less than what was owed in the past; so, we must commend them for those efforts.

As for credit facilities, the fact of the matter is today, we all go and get what we call Pro Forma Invoice from the NNPC and you have to pay in advance; so, if they are still giving us credit, it is very minimal. We are playing in the same field as any other player, and we have to pay. Sometimes, when you pay, you don’t get the product for another two weeks which we have to borrow money now. So, there’s no advantage; if we had, that was in the past. Now everybody is more or less on the same field. Where we have a problem is that since we now have to pay in advance, since our costs are now going up; the Petroleum and Natural Gas Senior Staff Association of Nigeria is always talking about increase of salaries. All these things, the margin is not there, inflation is there.

All our costs are going up, whether it’s the state government or the Federal Government agencies, all of them are doubling all the rates they collect from us for running petrol stations and we are still operating within this fixed margin.

So, life is difficult, that’s why you see the Asset Management Corporation of Nigeria is selling many depots because the people cannot service their loans. You can see many international oil companies have left; only Total remains in the downstream sector. Even the people who bought from the international oil companies themselves are divesting. If the business was attractive, they will not be running away from it.

Should we expect that the NNPC will continue to import petrol?

For now, there’s no other alternative until Dangote refinery comes on stream.

So, when will marketers resume importation of petrol?

We can’t because if the price remains at the level it is, how can I import when the landing cost is more than the pump price? For now, only NNPC can absorb that and indirectly, it is you and me who are bearing that because the money we would have put in other things, we are all using to drive the cheap fuel but that’s what we seem to like.

I don’t know who is getting foreign exchange at N305/$1. If we were getting it at that rate for petrol, we will be importing. But we are not getting it. Yes, when the scheme started, that was the plan and CBN was the one handling it. Eventually, the NNPC took it over, and we don’t know who is getting it at N305.

We are not importing PMS at all but if we want to import Automotive Gas Oil (diesel) or Aviation Turbine Kerosene (aviation fuel), we have to go and buy at N330 or $346. You can’t compete because the NNPC is bringing everything at N305; so, it is not a level playing field at all.

At what exchange rate do you think marketers would be able to import petrol?

If we were getting at N305, maybe we will be able to [import]. But again, technically, for the country as a whole, does it even make sense? In the market, your dollar is being sold at N360; so what Nigeria should be earning for every dollar is N360. That is really the market value. So, every time you are even selling it at N305, you are also subsidising and it is a loss to the country. So, we all have to determine what we want to do.

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