• As FG intervenes to halt further pump price rise
By Adewale Sanyaolu
The Federal Government appears to be at crossroads over its recent deregulation policy of the downstream sector as fuel queues again resurfaced across the country last week.
President Bola Tinubu had during his inaugural address on May 29, announced an end to fuel subsidy.
The development opened up the market and broke the monopoly of the Nigerian National Petroleum Company Limited (NNPCL), which had been the sole importer of Premium Motor Spirit (PMS), popularly called petrol, a role it assumed since 2016.
However, recent developments in the downstream petroleum industry in the last two weeks has raised dust over the workability of the deregulation policy as some oil marketers have indicated their decision to suspend further importation of petrol over foreign exchange scarcity and then spiraling rates.
Oil marketers, on Sunday, had raised the alarm that the cost of petrol, would rise to between N680/litre and N720/litre in the coming weeks should the dollar continues to trade from N910 to N950 at the parallel market.
They also hinted that dealers seeking to import PMS were being forced to put the plans on hold due to the scarcity of foreign exchange to import the commodity.
Oil dealers said that the CBN Importers and Exporters official window for foreign exchange, which boast of a lower exchange rate of about $740/litre, had remained illiquid and unable to provide the $25 to $30 million required for the importation of PMS by dealers.
More worrisome is recent pronouncement by the Federal Government assuring Nigerians that petrol prices won’t go up, a statement that has been described by industry observers as negating the principle of deregulation which only allows market forces to determine the price of petrol.
They argued that the assurance by the Federal Government means that the additional cost should price go up would be absorbed by the Federal Government.
Commenting on the development in an interview with Sunday Sun, President, Petroleum Products Retail Outlets Association of Nigeria (PETROAN), Mr Billy Harry, explained that marketers who had products before the spike in foreign exchange are concerned about how to restock under a N900 to $1 exchange rate.
He maintained that the foreign exchange value has impacted negatively on the buying power of the Nigerian naira, thus giving room for speculation by those who are given licenses to import that they may not be able to raise $25 to $30 million to import a cargo of petrol.
Harry disclosed that since the marketers are not sure of the next source of foreign exchange, this has eventually led to supply being lesser than demand.
‘’These are market factors that will play out and show some pockets of queues will pop up. For me, I personally observed that some retail outlets are just using one pump to dispense, but upon close examination, I discovered that they are truly short of supply and only selling from tanks that had products,’’ he said.
The PETROAN boss said that the only solution to the frequent crisis was for the country to fix its four moribund refineries and not rely on a private sector-led investment which promised to deliver petrol in the first week of August, but hasn’t lived to that promise.
He said that in the West Africa region, the selling price of Nigeria’s petrol is still the cheapest among its peers, saying that others when converted to naira sell about N1,000 per litre.
Harry said marketers that were yet to make fresh orders are weary to import because of the government pronouncement that prices would not go up while those with products are equally skeptical.
‘’With this pronouncement by the government, it means somebody must be ready to pick the extra cost if prices go up. And that cannot be any other entity than the government. So in a way, we can say that subsidy has crept back into the system,” he pointed out.
Also speaking, Partner, Bloomfield Law Practice, Mr Ayodele Oni, said that the pronouncement by the government assuring Nigerians that prices of petrol won’t go up amounts to re-introduction of subsidy.
He said that any move targeted at returning to a subsidy regime would not augur well for the economy because since May 29, savings have been made.
Oni said that part of the savings made is what the government has used as N5 billion palliative to each state to cushion the effect of subsidy removal.
Rather than return to a subsidy regime, Oni advised that the government should deploy the savings from subsidy to infrastructure development, mass transit buses for the masses in a bid to cushion the effect among other palliatives.
He added that the government should go a step further by giving timelines to its promises on how it plans to utilize the proceeds from subsidy savings so that Nigerians could track the progress.
However, the National Operations Controller of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Mr Mike Osatuyi, maintained that the country is in a deregulated regime operating without subsidy.
Rather, he said that currency speculators and hoarders should be held responsible for the distortions in the foreign exchange and downstream markets.
He said that the sharp rise in exchange rates to about N900/$1 has forced many marketers to suspend further importation of petrol till the market is clear.
He said that those hoarding foreign exchange have been forced to release them as a result of the pronouncement by the Central Bank of Nigeria (CBN) that the president has approved some measures to safeguard the foreign exchange market.
‘‘24 hours after that pronouncement, the naira started witnessing some gains because the speculators and currency hoarders began to release what they have stockpiled into the market and that brought down the exchange rate to about N840/$1,’’ he stressed.