The massive imports of Premium Motor Spirit, popularly called petrol, using the United States dollar, will continue to put pressure on the naira and cause a further devaluation of the local currency, the National Public Relations Officer, Independent Petroleum Marketers Association of Nigeria (IPMAN), Chief Ukadike Chinedu, explains in this interview, among other industry issues.
Excerpts:
The amount spent as subsidy on petrol by the NNPC has continued to rise, depleting revenues meant for the three tiers of government. What’s the view of marketers on this?
One particular thing that should be made clear as regards this issue is the rate of the United States dollar against the naira. If you look at the rate of the dollar today, it is over N600 to one dollar at the parallel or black market and whatever affects this market also affects the purchasing power and the rate of consumption. If the dollar is over N600 at the black market and up till now Nigeria is still heavily dependent on the importation of petroleum products, things will be difficult for us in this aspect. Nigeria is depending heavily on the importation of petroleum products, all the refineries are not yet working despite several promises by government that the plants will start production.
The value of the naira is depreciating daily, so what do you expect? Nigeria will continue to subsidise petroleum products and that is static at the moment and based on this, our naira will continue to be devalued, because so much dollars are just being deployed in pursuing products. The products we buy here in Nigeria are purchased in naira, and not in dollar; but we use the dollar to make payment for imported products. So when the government subsidises the products, that subsidy is at who’s expense? It is a way of devaluing the naira, because our naira today is over N600 to one dollar, the local currency does not have strength anymore and this calls for serious concern. We really need to look at how to curtail this fall of the naira and reducing the massive import of petrol with our scarce foreign exchange is one major way of doing that.
How can this be achieved when our country lacks the capacity to refine crude?
Fixing the refineries is supposed to be our priority considering the gains it would have on the economy and the country as a whole. Also, the modular refineries that are supposed to have been functional are not meeting up as expected. About two functional modular refineries currently sell diesel at the rate of N600/litre; even when the product is locally produced, they sell it almost at the same rate as the international market. So the country really needs to restrategise. The managers of this country should encourage modular refineries in Nigeria.
Secondly, even small-scale refineries should be encouraged to come up to boost the moribund refineries we have. Nigeria can even build a brand new refinery from the scratch, it will help us. We have been waiting for Dangote refinery to come on stream. But if it comes on stream, what is going to be the difference? I’m made to understand that they will also buy crude at the international rate, they will refine it and when this is done at the international rate, we may still buy it at the imported rate, except there will be some form of cost control on this.
So there must be a competition of petroleum products refining in Nigeria, whereby we can have alternatives. We can also stop the dependency as regards the purchase of petroleum products outside the country because when there is little trouble in the international market, it affects Nigeria drastically. We saw how the war in Ukraine affected us at the initial stages as some cargoes got stuck. You have to take all these factors into consideration because these are issues that often lead to scarcity of products. And once there is scarcity, it will have a toll on the masses, and once it has a toll on the masses there will be inflation. These are the things that are affecting our local market.
Are marketers not interested in building refineries, whether modular or large-scale refineries?
We have considered that several times. But I still want to let you know that I’m aware that 11 companies were pre-qualified to build refineries in Nigeria. And out of that 11, it is only one or two that we are hearing about currently, the one in Anambra State and that of Dangote. Up till now the companies that were pre-qualified have not delivered, except Dangote who is nearing completion with his own.
Do you have any idea of what could be the challenges facing them?
They complain of so many challenges ranging from bureaucratic bottlenecks, government policies that are not friendly to the establishment of such facilities and the issue of security. This is so because most of these companies want to be very sure that whatever investment they are putting in Nigeria is properly taken care of and they are sure of it. They don’t want a situation where they will invest their monies in Nigeria and end up having problems. You are aware that in this country some years ago, we had the likes of Dunlop and Michelin and they were all producing vehicle tyres in Nigeria. But insecurity and policy inconsistencies have driven all of them away.
These are factors preventing investors from coming into this country. There is also the concern of power supply, which is one of the basic things. So why don’t we hand over some of these refineries or partner those who know how to utilise them. We have expatriates, both Nigerians and foreigners, who can handle these things, but the bureaucratic bottlenecks or those cabals who make billions from petrol imports, will not allow this.
Since marketers are aware of these challenges, why are you not supporting the government in terms of petroleum products importation?
We brought in products sometime ago, but getting our money back became a very big problem for almost all of us who imported products then. Even getting forex from the Central Bank of Nigeria to be able to bring in products comes with so much bureaucratic bottlenecks that were too much for us. So we now became dependent on the imports by the NNPC and their authorised merchants. IPMAN has the capacity,
I want to tell you that we have the wherewithal to bring in products and we also have some of our partners and brothers in the Depot and Petroleum Products Marketers Association of Nigeria who are ready to give us their tank farms to be able to store these products. But the issue is that many times repatriating this money becomes a problem because by the time you import the product and after its sale, you will find out that the scarcity of the dollar would have caused inflation that you would not be able to get forex again at the required rate for imports.
The dollar required for the next import could be 10 times higher than what it used to be when you initially purchased the product. By the time you finish selling the products you imported and you find out that the dollar is almost N700, how will you recover or who will now bear the cost of subsidy that you had incurred? So this jump and fluctuation in the dollar is a serious issue.
Aviation fuel price hike has also been an issue lately, leading to a jump in airfares. What is the reason for this astronomical price increase?
This is also tied to the issue of forex, aviation fuel is a petroleum product and it is also being imported. The product is being imported by the NNPC and very few dealers and sourcing for the dollar has remained an issue. That is why operators in the aviation industry are clamouring and asking the NNPC whether it could give them the leeway to import JetA1.
But the fact remains that whether they join in the import of aviation fuel or not, the commodity is not produced in Nigeria and you need to access the dollar to make such import. Therefore, it is still going to come to the same thing that you need dollar and the cost of the commodity will be affected by this. So, the solution still remains that we must refine our crude and get our refineries working and competitive.
Abuja and neighbouring Nasarawa and Niger states have been witnessing petrol queues by motorists. What could be the reason for this?
It is due to the problem of logistics. There are products and I say this because if there are no products, you will find out that within two to three days the queues will hit Port Harcourt and Lagos. Anytime you see serious scarcity is when it hits Lagos and Port Harcourt.
So the problem has to do with logistics, there are concerns about gridlocks in some loading areas due to the overlapping effect of what happened in the downstream oil sector some months ago. But I know that the Nigerian National Petroleum Company Limited is trying as much as possible to load products to Abuja and its environs.
I want to be sincere with you in this, because if you look at most of the barges of trucks that I have their statistics which have loaded between Port Harcourt, Calabar and Lagos, you will find out that NNPC is giving more volumes and priority to marketers who are loading in these areas. You will also find out that in Port Harcourt depots, they are also giving priority to trucks that are going to Abuja and environs. So I believe that before this weekend, Abuja will be wet with products. – Culled from Punch.
