How NNPC's Forex Advantage Prevents Oil Marketers From Importing PMS - IReporteronline
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How NNPC’s Forex Advantage Prevents Oil Marketers From Importing PMS

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When Nigeria’s President Muhammadu Buhari backed the Petroleum Product Pricing Regulatory Agency, to perform its statutory duty of regulating the price of gasoline using market parameters, independent importers would have had a renewed hope that their dependence on the state-owned NNPC was over. They were wrong.

The dashed expectation resulted from the inability of the independent importers to access forex at the same rate as the NNPC from the Central Bank of Nigeria, a worrying development industry watchers say impedes competition and impacts negatively on the margins of the independent importers.

A technical committee set up by the minister of Labour and employment outside the purview of the PPPRA to address the corporation’s undue advantage in December 2020 submitted its report in February 2021 but the government is still dallying on how to proceed.

The presidency’s policy flips and signals of uncertainty are hitting petrol retailers hard.

“We have been shouting that our business is dwindling and we cannot restock,” says Billy Gillis-Harry, President Petroleum Product Retail Outlet Association of Nigeria. “A lot of retail outlets have eaten into their capital due to losses and we are asking the government to halt these trend by fully deregulating the market.” Gillis-harry was speaking on March 12, when the minister of state for petroleum resources described a modulated price advised by the PPPRA as ‘misinformation.’

If any marketer dared to import petrol in April last year, they would have done so at an assumed N8.23bn more than it would cost the NNPC, thanks to a forex difference of N60.15.

Between April and September, the last month the corporation released its monthly financial and operational report, the former is the month when PPMC imported its highest volume of petrol – 1.81bn liters. This comes down to an average of about 60m liters per day. Considering that the Seme border was supposed to have been closed at this time, this volume of importation is higher than the N50m average the corporation says Nigeria consumed prior to the border closure.

The importation made in May was the lowest of the period. Since the country was on lock down in April, the daily importation of 16m liters comes as no surprise.

August was the month when the NNPC’s advantage over an oil marketer, who attempted to import the same volume of product, was most pronounced in terms of Ex-coastal price – the sum of the cost of purchasing and shipping refined products.

With an ex-coastal price for the NNPC at N113.70 calculated based on a forex exchange rate of N360 to the greenback, an oil marketer would have set his/her own ex-coastal price at N146.77, no thanks to a forex rate of N464.71. This gives the NNPC a healthy advantage of N33.07.

In terms of total volume of production, September was the month when the NNPC’s forex favour was most prominent. Based on an import of 1.58bn liters of PMS, an ex-coastal price of N113.70, a dollar exchange rate of N379 offered to the NNPC and an exchange rate of N473.48 sourced by an oil marketer from a Bureau de Change operator, it would have cost a daring trader N44.75bn more to import the same volume of refined gasoline.

Despite the PPPRA’s constitutional right to fix PMS prices based on market forces, the agency did so only thrice in April, June and July. The Petroleum Products Marketing Company, a subsidiary of the NNPC whom the PPPRA ought to be regulating, released memos to oil marketers for all months in view, telling them the price at which it brought the product to the depot.

“The agency shall monitor market trends and periodically advise the NNPC and oil marketing companies on market-based price,” the first clause of the third section of  a gazette approved by the president empowering the PPPRA to regulate prices based on market forces read. Statements from government officials defined ‘periodically’ as used in the PPPRA gazette to mean monthly.

Only the PPMC’s ex-coastal price for March – 99.44 and August – 113.70 was found in media reports. The assumed cost of the corporation’s forex advantage was consequently captured using these two ex-coastal prices. The lower of the two ex-coastal prices was used to represent figures for March, April and May, when the cost of a barrel of Brent crude was less than $29.

Many would have assumed that the government’s pronouncement of March 18 removed subsidies but players who feel the brunt of the unfair advantage enjoyed by the NNPC in any form know differently.

National Operation Controller of the Independent Petrol Marketers Association of Nigeria (IPMAN), Michael Osatuyi, is confused by the signals coming from the presidency and wonders why the NNPC is allowed to continue reducing its remittance to the federation account at the expense of everyday Nigerians trying to make a living from the downstream sector of the oil and gas industry.

“Today, they put a price band, tomorrow they delete from their website,” he said in an interview on March 12. “What is clear now is that there is subsidy. PPPRA says fuel is N212, NNPC says it is N162 to N165. Who is paying the difference? It is the government. The NNPC is collecting this from our federation account. Is the government an NGO or a civil society?”

Gillis-Harry is , however, concerned by the low retail margin of N6.19 afforded to retailers. He says it does not give room for the retail end of the oil and gas industry to innovate.

“Retail outlet owners are the one bearing the brunt of this brouhaha. Regulatory authorities cannot sit down and do an arm chair economics of this business, they need to input experience from the grassroots into their regulation,” he say. “Anything that does not involve data, speculation comes in. The minimum margin that we have proposed on any occasion is N14.”

The NNPC has claimed often that it provides some form of forex relief to oil marketers in conjunction with the Central Bank. Its former Chief Operating Officer downstream, Henry Ikem-Obih, said in 2019 that the corporation had saved $1.7bn from a forex intervention scheme launched in conjunction with the apex bank for oil marketers. In a statement published in September 2020, the spokesperson for the NNPC, Kennie Obateru, quoted the Group Managing Director of the oil company, Mele Kyari, as saying that the corporation had spent N2.13tn on forex subsidies for oil marketers between 2016 and 2019.

Mr. Obateru has so far declined to comment, directing this reporter to the Central Bank instead.

Media advocacy organisation, Civic Media Lab, sent a Freedom of Information request in 2019, asking the central bank to clarify the statements made by the NNPC official and state what companies receive priority forex rates if any. The firm received no  response.

The Nigerian government is undoubtedly in a tug of war between trying to get subsidies off its hands and keeping whatever percentage of popularity it has. Hikes in the price of bread and gasoline after all, have been the downfall of regimes in Sudan and Algeria.

Media reports and comment by experts in 2018 suggest that President Emmanuel Macron’s green tax, which inflated the price of petrol in France, is one of the flares that sparked the Yellow Vest movement into life. Those demonstrations lasted for over a year and spread to neighbouring Belgium. Observers say fears like these and constant reminders from organised labour appears to inspire the Presidency to continue passing the buck like its predecessors did to it.  Will the government learn a lesson that time is running out and the world is evolving past PMS?

This story was produced under the NAREP oil and gas 2021 fellowship of the Premium Times Centre for Investigative Journalism.

Source: Sahara Reporters

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Naira Closes Week Stronger To The Dollar

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Naira closed the week stronger to the dollar after four days of trading at the I&E window of the foreign exchange market.

Naira had opened the week weaker to the dollar after Tuesday’s trading at N410.50, but on Friday data posted on the FMDQ Security Exchange where forex is officially traded showed naira exchange at N409.00.

Friday’s exchange rate represents a 0.16 per cent appreciation from N409.65, the rate at which the naira closed on Thursday.

Similarly, forex turnover increased week on week increase from $35.55 million on Thursday last week to $55.21 million.

Although Friday turnover represents a drop by 41.07 per cent, from the $93.69 million posted on April 8th.

Market participants during Friday’s trading bid for dollar between N395.00 and N420.00.

In the unofficial market however, the naira remained unchanged against the U.S. dollar according to data posted by abokiFX.

The data posted showed that the naira closed at N485.00 at the black market on Friday, the same rate it exchanged hands since the start of the month.

At the end of Friday’s trading the difference between the unofficial market and the I&E window exchange rate stood at N76.

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Why Nigeria Can’t Stop Borrowing – CBN

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The Central Bank of Nigeria, CBN, has insisted that Nigeria can’t stop borrowing, mainly when it’s necessary.

Mr Godwin Emefiele, the CBN Governor, disclosed this in Abuja on Friday at the National Dialogue on Nigeria’s rising debt profile, titled: “The Rising Public Debt in Nigeria and the Challenges of National Development,” organised by the Action Aid Nigeria (AAN).

Emefiele, who was represented by Dr Tawose Joseph, the Assistant Director, Monetary Policy Department, CBN, said there is no crime in borrowing.

According to him, there should be monitoring and evaluation of the money borrowed and its purpose.

This is coming as AAN and stakeholders have expressed fear over unbalanced borrowings levels, rising national debt profile and increasing poverty level under President Muhammadu Buhari-led government.

He said, “Debt is part of fiscal responsibility. Debt is never a crime or a sin. The private entity also borrows to survive. What matters most is the debt’s quantum and the debt usage as well as if money is borrowed as a result of the shortage of income generation.

“When you compare the income and expenditure, and it is efficiently used, it is part of government responsibility. But where the fear is when it is above the threshold.

“CBN understands that when there is a crisis in an economy, then the burden of debt would be something. That is why the conventional and non-conventional instruments are there to ensure price stability in the economy.”

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Aisha Buhari Rakes N155m At Book Launch

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Wife of the President Mrs Aisha Muhammadu Buhari Thursday realised N155 million at the public presentation of a book titled, “Aisha Buhari: Being Different.

 

The book, written by the Senior Special Assistant to the President on Administration and Women Affairs, Office of the First Lady, Dr Hajo Sani, was launched at the State House Banquet Hall in Abuja.

 

National leader of All Progressives Congress (APC) Mr Asiwaju Bola Ahmed Tinubu bought copies of the book N20 million while Alhaji Aliko Dangote and Alhaji Abdulsamad Rabiu bought copies for N30 million and N25 million, respectively.

 

Mrs Folorunso Alakija and Chief Kessington Adebutu bought copies for N10 million each while representatives of Alhaji Muhammadu Indimi and Captain Idahosa Okunbo donated N20 million each.

Mrs Bola Shagaya and the representatives of Arthur Eze donated N10 million each.

 

The chairman Nigeria Governors Forum (NGF) Governor Kayode Fayemi of Ekiti state, and Deputy Senate President, Mr Ovie Omo-Agege pledged an undisclosed amount of money for copies of the book.

The event was jointly organised by the Office of the First Lady of Nigeria and the Women and National Development (WAND).

 

Meanwhile, Vice President Yemi Osinbajo has extolled the virtues of wife of the President, Mrs Aisha Muhammadu Buhari, saying she has redefined the role of the office of the First Lady of the country.

 

Speaking at the public presentation of the bookOsinbajo said, the First Lady has endeared herself to Nigerians by stepping outside the box of what used to be the personage and traditional roles in Nigeria’s presidential history.

He said she has also regaled Nigerians with many firsts, including keeping Nigerians updated with the activities of her office or how she feels on an issue via the social media outlets and connecting with the public in real-time.

 

“She’s, of course, the First Lady to be on Twitter, on Instagram, and other social media platforms, getting her unfiltered views across to the Nigerian people and she’s probably the first to receive, in real time, the opinions of Nigerians on her views. With her views, forthright, crisp, truthful and once in a while controversial, she has established an ongoing conversation with the Nigerian people.”

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