News - Oil & Gas - March 1, 2021

Why fuel queues have resurfaced at filling stations nationwide

The long queues of anxious motorists that have resurfaced at most filling stations across the country since Sunday is as a result of “speculation and unbridled quest for profiteering in anticipation of the outcome of the ongoing discussion between the government and organized Labour over the fuel crisis”, MEDIATRACNET’s investigations have revealed.
Queues which appeared to have been a thing of the past resurfaced on a Sunday amid speculations that the Federal was planning another fuel price increase on March 1.
Since the government has been meeting with the organized Labour on unresolved issues bordering fuel pricing, Nigerians have been anticipating that the outcome would likely be another upward adjustment of the retail fuel price at the pump.
In September 2020, following the last fuel price increase by the government, the Nigeria Labour Congress (NLC) threatened to shut down the country with an indefinite strike action to protest the decision.
However, after a preliminary agreement, a bilateral committee composed of representatives of the government and Labour was constituted with a mandate to find ways of establishing an acceptable framework for fuel pricing in the country.
Although the committee submitted its report last month to the government, there appeared to be a stalemate on the recommendations.
Labour is insisting it would not support an import-based deregulation policy, considering the high foreign exchange component in the pricing template.
Rather, they said they would want the government to repair all the four refineries in the country and made to function before contemplating the introduction of the deregulation policy.
Findings on Monday revealed that the queues at the filling stations may have been artificial scarcity caused by fuel marketers and speculative activities by consumers.
While the marketers are trying to create a situation that would force the government into reversing its decision on removal of fuel subsidy and introduction of deregulation policy in the downstream sector of the petroleum industry, the consumers are stocking products for fear of an imminent price increase.
As the meeting is ongoing, while the marketers are strategizing to make the most of the expected new price regime, by refusing to open their storage facilities fully to dispense products to customers, the consumers on the other hand are busy stocking up as much petrol as they can at the current price in case there is an increase eventually.
The Nigerian National Petroleum Corporation (NNPC) has already announced that the government was not contemplating any increment in the retail price of premium motor spirit (PMS), popularly called petrol.
The NNPC in a statement on Sunday by its spokesperson, Kennie Obateru, said the government was not considering any decision that would jeopardize its ongoing engagements with organized labour and other industry interest groups on an acceptable framework for fuel pricing in the country.
Marketers’ pressure
But one of the marketers who is familiar with with the situation told our reporter on Monday that they cannot break even with a retail price of petrol still at N162 per litre when the current landing cost of the product is about N174 per litre.
“When all other components in the fuel pricing template are taken into consideration, the appropriate retail price for petrol today at the filling stations should be between N210 and N215 per litre for the marketers to break even and stay in business,” the marketer said.
But, a review of the Petroleum Products Pricing Regulatory Agency (PPPRA) pricing template as at February 24, 2021 did not support such a price increase.
Another marketer gave the appropriate price at an average of N180 and N190 per litre.
With expected open market price of about N155.07 per litre; ex-Depot price at N125.63 per litre, and ex-depot price for collection at N133.28 per litre, approved retail price band should be about N135 and N145 per litre.
Details of the cost elements in the pricing template showed a cost+freight of $552.89 per metric ton, an exchange rate of N306 to the dollar would translate to about N126.56 per litre.
Further details of the pricing template showed lightering expenes N2.75 per litre; Nigerian Ports Authority (NPA) charge N0.84 per litre; NIMASA Charge N0.22 per litre; jetty thru put charge N0.60 per litre; storage charge N2 per litre; financing N2.73 per litre; landing cost of N135.70 per litre, total distribution margin N19.37 per litre
Government’s dilemma
The government appears to be between the rock and the hard place at the moment.
In line with its decision in April 2020 to introduce the deregulation policy in the downstream sector of the petroleum industry, the government did not make any provision for fuel subsidy in the 2021 Budget.
But the government has not been able to pursue the deregulation policy without resistance from Nigerians, particularly Labour, which is equating the policy with price increase, at a time workers’ pay has not been increased.
Afraid that Labour may mobilize Nigerians to protest any decision to allow marketers to hike the price of petroleum products, the options appear to be limited on what to do.
Returning to subsidy regime appear not to be an option as conservative estimates show the government would require as much as between N80 to N100billion to continue paying for fuel subsidy to allow Nigerians consume petrol at the current price.
Removal of fuel subsidy was one of the conditions the World Bank and the International Monetary Fund (IMF) for Nigeria to access funding to stimulate recovery in the economy during the recent recession.
Going with deregulation without meeting Labour’s conditions for the rehabilitation of the refineries will pose another difficult option for the government.
Yet, the marketers would want to be part of a deregulation that the government would dictate the price of the commodity.
“Deregulation answers only to the movement of prices in the market, moderated by the forces of demand and supply, and dictated by the competing conditions in the market,” one of the marketers who spoke with our reporter said.
He accused the NLC of wanting to eat their cake and still have it, by pressurizing the government to remove fuel subsidy, and at the same time not want fuel price to increase.
“From where do they (NLC) expect government to have money to continue paying subsidy? Should the government go and borrow money to continue paying subsidy as they are borrowing money now to pay workers’ salaries?” he asked.
He confirmed that only NNPC is importing petroleum products into the country at the moment, as there is no foreign exchange available for other marketers to join.
Marketers creating artificial scarcity
“Since January this year, marketers have been buying and storing up petroleum products in anticipation that the government would take a decision to either return to the subsidy regime, or increase fuel price by March 1.
“Most of the marketers have flooded their facilities with products. Some have turned their trucks into storage tanks, while others have converted their underground water storage facilities into fuel storage tanks.
“As at today, there is no filling station that does not have fuel filled up in their storage tanks. The cumulative sufficiency level can last for about 80 days. NNPC only knows what is inside storage facilities and the import vessels.
On the queues that have resurfaced at filling stations across the country, the marketer blamed it on panic buying by consumers who are stocking up petrol with the expectation that there might be an increase in fuel price.
He said the queues would disappear in a few days once it becomes obvious the government was not going to increase fuel price, by returning to fuel subsidy, or announced an increase to the appropriate price.
“Every filling station has fuel in their tanks. They are selling at N162 per litre. They are waiting on government to announce an increase in price to N200 per litre or above.
“What is happening is that if a marketer has about 100,000 litre of petrol in stock, it will not want to rush and exhaust that in case there a new price tomorrow. If the filling station has 10 pumps to sell, it will reduce to two only. And every buyer will have to queue with those two pumps. If there are trucks that are supposed to discharge, it can ask the truck to delay delivery for some time.
“If the government says it is increasing price to N200 per litre or returning to fuel subsidy, the queues will disappear and people will adjust to the new reality

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