Major and independent petroleum product marketers in Lagos State have chosen to suspend their dispensing outlets due to growing speculation about a potential increase in the pump price of Premium Motor Spirit (PMS), commonly referred to as petrol.
According to our correspondent’s reports, the majority of filling stations have ceased operations, with a few still open experiencing exceptionally long lines of vehicles.
Even outlets that had initially opened, like the Total Energies outlet near Abule (Sheraton Hotel Ikeja) and MRS at Ikeja, closed down by approximately 9a.m.
Elder Chinedu Okoronkwo, the National President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), stated on Monday that nothing has changed at the moment. He indicated that the Nigerian National Petroleum Company Limited (NNPCL) would be the appropriate authority to provide official statements on the matter.
Okoronkwo directed inquiries about the landing cost of the product to depot operators, as they are better equipped to determine these aspects.
Reliable sources suggest that the price of petrol at the pump may potentially rise to N750 per liter.
Additionally, transporters who spoke to our correspondent on Monday morning expressed frustration over their inability to access the product due to numerous stations in the state suspending operations.
Recent reports indicated that marketers were considering halting further importations of petrol.
Industry sources informed our correspondent that the rise in the exchange rate has negatively impacted the profitability of the business.
Just last month, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) announced that oil marketers had commenced importing petrol into the country. Up until then, the exclusive importation of the product was handled by the NNPCL.
During a stakeholders’ engagement in Lagos, Farouk Ahmed, the CEO of NMDPRA, revealed that out of the 56 oil marketing companies that applied for licenses, 10 had demonstrated commitment, and three had already imported fuel.
Ahmed identified the three companies currently importing the product as A.Y. Shafa, Prudent, and Emadeb, and he mentioned that others would join in the coming weeks.
He also emphasized the federal government’s commitment to deregulating the sector in accordance with the Petroleum Industry Act (PIA).
Addressing current challenges, he stated that efforts were underway to resolve issues that previously hindered seamless product importation.
Lately, oil marketers have been calling on the government to address security concerns and suspend the 7.5% Value Added Tax (VAT) on diesel as part of efforts to support operations in the downstream sector.
Furthermore, they urged the government to implement measures aimed at tackling the rising cost of food items and transportation, a critical issue impacting the welfare of citizens affected by recent sector deregulation.
The chairman of the Major Oil Marketers Association of Nigeria (MOMAN), Olumide Adeosun, commended President Bola Tinubu for launching the committee on fiscal policy and tax reforms. Adeosun emphasized the urgency of these measures, given the challenges citizens are currently facing.
In a statement, MOMAN confirmed its members’ capability to import petrol into the country, especially since their licenses are renewed on a quarterly basis.
He said: “The reality is that many of us have importation licences that have never lapsed. We renew them on a quarterly basis via the NMDPRA portal. Some of us are also importing diesel, so we need these licences.
“The licences cover multiple products such as ATK, PMS, and AGO. The regulator will tell you that we need them even when we are receiving products from the Nigerian National Petroleum Company Limited (NNPCL), particularly on the high sea.”
But speaking to our Correspondent, a key petroleum product dealer, said marketers would protest rising exchange rate and dollar scarcity that have impacted their profit.
The source disclosed that they cannot compete any longer as the NNPCL accesses forex at N720 per dollar while marketers buy at 780 per dollar and as at Friday, dollar sold at N850, thus creating imbalance in the system.
Asked if this will push for further pump price adjustment, he said, “So long as the exchange rate keeps going up, the pump price will keep going up.
“Go and check and see that crude price and refined products are sold in dollar. So we buy in dollars and as such market fundamentals determine the price at which we marketers will sell.
“As it stands now, we are not ready to import, else we will sell at a loss because NNPCL gets dollar at lower rate and except this disparity is addressed we are going back to the previous situation,” he said.
Meanwhile, President of the Nigerian Association of Liquefied Petroleum Gas Marketers (NALPGM), Olatunbosun Oladapo, has warned that rising international prices, high tax rates and vessel prices, currency scarcity, and naira depreciation would determine the new price of Liquified Petroleum Gas (LPG), commonly known as cooking gas, if the listed factors refused to wane by this week.
“It will begin next week because international prices have risen. Ship costs have risen, and taxes have risen, but consumers have not earn more.
“Their purchasing power has decreased. Everyone is in tears. Consumers, middlemen, and retailers are feeling the pinch because business is now slow,” he warned.
Olatunbosun called the impending price increase as “unfortunate”, adding that, “the situation is quite bad since prices are rising. Nigerian customers are in a terrible situation since they can no longer buy petrol.”
According to him, consumers were returning to cooking with firewood, charcoal, and sawdust.
“The government should step in and alleviate the masses’ suffering by providing palliatives and lowering taxes and levies,” he stated.
“Imagine that for every 1kg of gas priced at N700, the tax would be N3.50.” “How much is there left in this business?
He encouraged the government to tax profits rather than products since customers were no longer purchasing gas.
“Local taxes are exacerbating the problem,” he added, urging marketers who have the option of purchasing things locally to set pricing with “consumers’ sympathy” in mind.
His response comes in light of the revelation that a shortage of vessels in the global market is poised to push up local expenses for Liquefied Natural Gas, commonly known as cooking gas, in the upcoming months, as reported by various sources.
Due to a scarcity of vessels in the international market, charter rates have surged in anticipation of the 2023 winter season, which is expected to bring a heightened demand for heating fuel.
Based on data from Spark Commodities referenced by Bloomberg, charter prices have escalated to $284,750 per day for November and $206,750 per day for October, as of August 1, 2023. These figures represent a fourfold increase from the existing price of $70,500 per day.
“Tanker supplies are becoming increasingly scarce as traders use the ships as floating storage in the hope that LNG prices will rise as the weather cools.”
“Volatile shipping rates can eat up margin for an LNG trader looking to cash in on higher winter prices, and rising transportation costs can ultimately mean higher prices for buyers in Europe and Asia.”
In late July, the count of LNG boats floating on the water for at least 20 days surged, with a recorded total of 42 vessels. This figure represents an increase of approximately 27 percent compared to the same period last year.
The pricing of Nigerian LPG is internationally benchmarked and is consistently influenced by global pricing, which is based on Nigerian Liquefied Natural Gas Contract prices.
Furthermore, the NLNG CP, like other commodities traded on a global scale and prone to price fluctuations due to market dynamics, is subject to change and may experience both higher and lower evaluations, often revised at least once to three times.
The depreciation of the local currency would inevitably impact the domestic price of LPG. According to the Central Bank of Nigeria, the dollar was valued at N749.62 on Wednesday.
The Nigerian Liquified Natural Gas, NLNG, frequently sells the locally generated cooking gas to off-takers at the prevailing currency exchange rate.
As per reports, the rates for 20 metric tonnes of LPG at the major Apapa, Lagos depots, spanning from July 28 to August 7, ranged between N10.7 million and N11 million.
For several months, local cooking gas users have benefited from cost-effective pricing due to a decline in global costs.
Amidst the depreciation of the naira, the price of LPG decreased from an average of N730 per kilogram in June to approximately N600 per kilogram in July before experiencing an uptick to N750 per kilogram in August.
According to data from the US Energy Information Administration, there was a sharp 76.1 percent drop in June, with prices plummeting from 8.78 per one million British Thermal Units on May 31 to 2.10 per one million BTU on the same date.
The National Bureau of Statistics reported a 6.71 percent month-on-month decline in the average retail price for refilling a 5kg cylinder of cooking gas, ranging from N4,360.69 in May to N4,068.26 in June.
This cost also experienced a 3.56 percent drop from N4,218.38 in June 2022 to the same figure in June 2022.
Among various states, Kwara had the highest average price for refilling a 5kg cylinder at N4,750.00, followed by Niger with N4,691.16, and Zamfara with N4,683.33.
On the contrary, Ondo had the lowest price of N3,287.86, trailed by Ekiti and Nasarawa, which recorded prices of N3,288.46 and N3,364.62, respectively.
