Uncertainty looms as fuel marketers run out of stock today

• ‘Ready to buy country’s refineries’
• U.S. agency seeks removal of subsidy

THERE are indications that fuel marketers and importers would run out of stock for Premium Motor Spirit (PMS), otherwise known as fuel, at the Apapa Depot and filling stations across the country due to the inability of the Federal Government to meet subsidy obligations of over N356.2 billion.

Besides, as of yesterday, the country’s subsidy on a litre of fuel has increased from the N15.82 it recorded in February to N41.96 per litre, according to the Petroleum Product Pricing and Regulatory Agency (PPPRA).

With this latest development, subsidy burden on the government has increased from N632.8 million to over N1.6 billion daily as the nation consumes about 40 million litres per day. This is the highest subsidy on price per litre of fuel since the Federal Government reduced the pump price from N97 to N87 per litre.

Also, the United States (U.S.) International Energy Agency (IEA) has stressed the need for oil producing countries globally to halt payment of subsidy on fuel and direct the fund to the development of the economy.

Meanwhile, marketers and importers under the auspices of Major Oil Marketers Association of Nigeria (MOMAN) and Depot and Petroleum Products Marketers Association (DAPMA) believed that privatisation of the nation’s refineries would be the only solution to the issue of fuel scarcity in Nigeria.

Specifically, MOMAN said that its members are ready to buy offer in the country’s refineries if given the opportunity.

It called for deregulation of the downstream sector in order to pave way for investment in private refineries in the country.

The Executive Secretary of MOMAN, Obafemi Olawore, said at a media briefing at the weekend that fuel marketers have not been able to order for new stock due to non-payment of accumulated subsidy of over N356.2 billion.

Olawore, who noted that the Federal Government had made provision for Sovereign Debt Note of N100 billion (a post-dated financial instrument), which is expected to mature at the end of April 2015, however said the remaining N256.2 billion comprises actual subsidy arrears for part of 2014 (Batches T and U) and 2015 (Batches A and B) and the foreign exchange differentials cum bank interests.

He put the actual subsidy for the period at N40.3 billion while the value of the foreign exchange differentials and accrued interest was put at N215.9 billion.

Olawore said that before the N100 billion SDN was issued, the government was indebted to the tune of N315.8 billion.

He said: “But if you deduct the N100 billion from the N315.8 billion, you will have 215.8 billion.

“Besides, the PPPRA had earlier approved Batches T and U for last quarter of 2014 for payment which amounted to N30.5 billion.

“In 2015, we also have Batches A and B for the products imported by MOMAN which has been approved by PPPRA but had not been paid. This also amounted to N9.7 billion.”

Olawore said as of Friday last week, members of both associations had just three and a half days left for stock to be depleted. This timing, according to him, is expected to lapse by yesterday midnight, saying that members were increasingly finding it difficult to continue importation of petrol for a while now, and that though it was the wish of MOMAN and DAPPMA to continue to import owing to the efforts committed to the exercise, market situation had continued to get tougher.

Olawore said that the association’s fear was that the 2015 budget as passed by the House of Representatives did not capture subsidy payment.

“If government is saying we should stop importation of petroleum or no more subsidies, they should please pay for what the association members had supplied. Right now, it is getting to a halt because we are bleeding; our suppliers are on us to pay for products supplied”, he said.

According to him: “Some days ago, the National Assembly approved the budget without any provisions for petrol subsidy, and nobody is talking to us.

“We want to know if we should still continue with what we are currently doing. We want to know who will be paying for subsidy on petrol going forward. Ultimately, we want to know who pays for the amount owed us.

“There is an out-going government as well as an in-coming one. Where do we stand? We need to get our money because our suppliers are on our necks.

“Our banks here are not even helping the situation because it has not been easy to access loan from them.”

He, therefore, urged the Federal Government to pay the claims so that marketers could continue with the importation and avoid scarcity of the products.

He hinted that the country may face another round of product deficit if the current situation was not addressed by the government, adding that the Nigerian National Petroleum Corporation (NNPC) would not be able to meet the huge demand for the product in the country alone.

In a petition written by MOMAN to the Minister of Finance, Dr. Ngozi Okonjo-Iweala, the association stated that despite previous assurance from the government to reimburse marketers the under recovery due to them as verified by the PPPRA, the government had till to date failed to honour its agreement.

The letter stated: “At the previous meeting, you empathised with the marketers and committed to full restitution provided these were verified by the PPPRA. You also assured marketers that they would be fully reimbursed for the interests (incurred due to the late payment) and foreign exchange differential elements of their under recovery within 30 days of the meeting.

“Furthermore, you committed to immediately issuing SDN for the outstanding under recovery with full payment on or before the April 28, 2015.

“Regrettably, despite your above commitment and assurances, the industry to date has only received approximately N30 billion in forex differential claims out of the N100 billion owed. In the same vein, only N34 5 billion has been received in core subsidy payments covering payments up to second quarter of 2014.

“Specifically, only three companies out of the six MOMAN companies received payments for forex differentials and no company, MOMAN or DAPMA has been paid interest charges on delayed payments.”

Meanwhile, IEA has identified the uncertainty in crude oil prices as opportunities for policy makers to eliminate subsidies on fossil fuel consumption.

The Nigerian government spends about N2 trillion on payment of fuel subsidy yearly.

According to the U.S. IEA Executive Director, Maria van der Hoeven, there are many types of fossil fuel subsidies, but analysis by the IEA focuses solely on subsidies that result in the prices paid by end users being reduced to below international benchmarks.

Speaking on IEA report on clean energy, he added that in Saudi Arabia, gasoline prices at the pump are some eight times lower than they are here in London. These are typically known as fossil fuel consumption subsidies.

He disclosed that governments around the world spent $550 billion on these subsidies in 2013, saying that this is more than five times the level of support that went to renewables. It is also twice as much as actual investment into renewables in 2014.

Hoeven noted that ten countries account for almost three-quarters of this $550 billion, and five of them are in the Middle East and North Africa. More than one-third of electricity in the Middle East is generated using subsidised oil. In the absence of these subsidies, almost all renewable energy technologies, plus nuclear, would be competitive with oil-fired power plants.

He stated: “In this past year we have seen significant initiatives to tackle subsidies in Jordan, Morocco and Egypt. Jordan removed fossil fuel subsidies early last year and raised electricity prices the following summer. Morocco has been reducing subsidies progressively on both diesel and gasoline since the beginning of 2014. Egypt has raised the price of residential gas supplies, gasoline and diesel. This could reduce Egypt’s subsidy bill by about one-third – that’s $5 billion.

And let us be clear: Fossil fuel subsidies are an extremely inefficient means of achieving their stated objective, which is typically to help the poor. IEA analysis indicates that only eight per cent of the money spent reaches the poorest 20 per cent of the population. Other direct forms of welfare support would cost much less.

“Of course, one of the most damaging effects of subsidising fossil fuels is that low-carbon technologies, and in particular emerging renewable energy technologies in the power sector, are less able to compete.

“This hinders investment in renewables, leading to stronger reliance on fossil fuels and higher greenhouse-gas emissions than would otherwise be the case. In addition, slower deployment of renewables, in turn, reduces learning rates and slows the pace of cost reduction as the technologies mature.”