Financial crisis hits petrol marketers as subsidy gulps N1trillion
Written by freshadmin3 on July 1, 2021
The Federal Government may have spent about N1 trillion subsiding 102 million litres of Premium Motor Spirit (PMS) in the couple of months, as prevailing challenges push operators in the downstream sector of the nation’s petroleum industry towards liquidity crisis.
While Nigeria is already subsidising almost the entire volume of PMS popularly known as petrol consumed by the West Africa region, industry players, yesterday, told Newsmen that the Federal Government might be paving way for smuggling and product adulteration in the region given the problems in the country’s downstream sector.
Besides looming retrenchment of workers and failing safety practices occasioned by reoccurring fires across stations and roads, stakeholders claimed that over 35 per cent of them, especially the independent marketers, had been edged out.
Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, had advocated for petrol to be selling for N256 per litre in the country, adding that about N150 billion is being paid monthly on subsidy.
Between January and June this year, the subsidy translated to about N900 billion. While the nation’s daily fuel consumption level stood at about 60 million litres in January, the corporation said the trend later rose 102 million litres.
With the continued increase in the price of crude oil at the international market, standing at $76 per barrel yesterday after jumping from about $30 a barrel roughly a year ago, the devaluation of the naira, which has almost doubled and remained unstable, as well as the fluctuations in the pump price of petrol, the state oil company kept its status as the only importer of the product.
The Pipeline and Products Marketing Company (PPMC) has been selling the commodity to retailers at N148 per litre, but marketers said through-putting usually push the wholesale price to over N157 per litre, including cost of transportation and union dues.
The development, is thus, creating a marginal gain of about N5 per litre, which may in fact, be spent on other charges, particularly operating expenses. Most stakeholders said this challenge makes smuggling and product adulteration thrive, as marketers move the black gold to neighbouring nations where it goes for as high as N400 per litre.
As much as 35 per cent of petrol marketers, especially the independent marketers, have already shut down their facilities, as bank funding dims on the backdrop of poor loan repayment arrangement.
In March last year, Minister of State for Petroleum Resources, Timipre Sylva, announced that the downstream sector had been fully deregulated and subsidy would no longer be paid on petrol, especially as budget provision was not made for it in the 2021 appropriation. Little did many Nigerians know that the minister would reverse himself.
While the price of crude was at record low then, government reduced the pump price, but as the situation improved at the international market, pricing gradually went up, leading to a backlash from the public.
The deregulation was immediately halted, as labour locked horn with government. A dialogue has been on between the unions and government for over four months. Without budgetary allocation, NNPC began to cover the differentials arising landing cost and pump price. The direct implication being the ceaseless borrowings and depletion of foreign direct investments.