Queues for Premium Motor Spirit (PMS), popularly called petrol, will end when the Federal Government halts PMS import monopoly of the Nigerian National Petroleum Company (NNPC) Limited and stops subsidy on petrol, the President, Petroleum Retail Outlet Owners Association of Nigeria (PETROAN), Billy Gillis-Harry posits, in this interview.
Excerpts:
What exactly is the major problem in the downstream sector, because we still see queues at filling stations, especially in Abuja and environs?
The problem is that every side needs to be transparent. We as retail outlet owners, we are ready to sell petroleum products to the teeming Nigerian public. We have no reason not to sell our products. Every single money that is used to buy 145,000 litres of PMS, almost N7m, is loaned and is time-bound. So every retail outlet owner knows that the right thing to do business-wise is to sell the products and try to turn around that sale as many times as possible. So with that scenario in view, there is no retail outlet owner that is hoarding product or giving it out through diversion. Yes, we know there will be bad eggs among the good bunch, but the fact that we are not having sufficient products is what is still the cause. But in the case of Abuja, it is clear to understand that if the bridging claims are paid to marketers, they can be able to recycle their product purchase cycles. That is just the reality.
So the payment of bridging claims is still an issue and insufficient supply is also an issue. If there are products and there is money for us to buy, why wouldn’t we buy and sell? What else are we in business for? Are we going to buy products and keep it? The answer is no. So that is the reality and I have explained this non-stop for weeks now. Now, to lay emphasis on the case in Abuja, why should there even be queues in Abuja? I mean when you have fuel queues in Abuja, it tells the world that something is wrong in Nigeria. That’s the capital of the country and then you go to Lagos you see queues appearing and disappearing, Kaduna is almost not having products in their retail outlets on many occasions. It is simply a situation of demand overwhelming supply. The supply process is not efficient to meet the needs and the increasing demand for petrol.
The NNPC often says it has enough products. But going by your position, is it that NNPC’s claims are not true?
Clearly if there are products, then it should be delivered. However, I do know that the authority is doing their best to make sure that everywhere is monitored and marketers are encouraged to sell products at the approved pump price. So if there are no products at the retail outlets then, that is why there will be queues. Therefore this clearly shows that demand is currently overwhelming supply in some cities including Abuja. The rule is supposed to be that there must be about 30 days sufficiency in Nigeria. NNPC is the only importer of petrol. The Nigerian Midstream and Downstream Petroleum Regulatory Authority will only know what it has approved in terms of the quality and quantity test of what has been imported. For products in storage they also would know, because from what has been delivered through the tank farms, there are records. But they (NMDPRA) can’t be held for NNPC’s inadequacies, because if NNPC says its has 30 days sufficiency in terms of supply, you cannot hold the downstream regulator for that, neither can you hold the retailers for it. This is because the retailers will only sell when we are given products. We are not importing, we are not manufacturing, there’s no refinery that is working.
Is there a solution to this?
The solution is simple. The subsidy that is being paid should be stopped. The money should be recycled into other developmental projects such as health, refineries, etc. Since the refineries have not been successfully fixed by the government, they should either give it wholly to private sector practitioners such as PETROAN, that own the retail outlets for which the products are being refined, to manage. Or they should allow us to import petroleum products and sell at the market-determined price, which is why we are saying that deregulation is the only answer to these incessant problems where the government will on one hand be explaining something, while on the other hand, practitioners will be saying something else. So let NNPC not be the sole importer of PMS into Nigeria. That’s the solution. And let (forex) foreign exchange be made available to marketers and companies that have facilities to be able to import and sell at the prevailing market price. That is just the solution.
Therefore as far as we are concerned, what we as an association can do is to get the government to work with us in making sure our refineries are working and that they are efficient. And we as businessmen know how to do that much better. Government really has no business being in business. So that is why we are saying, deregulate fully and then privatise the refineries and allow PETROAN to work with you to do part ownership of the refineries to make them efficient. This is because whatever you are refining, is it not for our retail outlets? So we are the ones you are refining for, and then for onward transmission to Nigerians to use as the last mile of distribution.
There is this concern that if subsidy is removed, petrol might sell above N500/litre. Are marketers not concerned about this?
This subsidy that we are talking about, what is its practical performance in the every day life of a Nigerian? We need to ask that question. Today you bought petrol at N250/litre, somebody else bought at N300/litre, while another person is saying let us just have the product because we are ready to pay N400/litre. So you can see that in different parts of the country there are different kinds of experience by motorists and other users of petrol. Therefore it is a very simple thing that we should level the ground by allowing deregulation to rule. That’s the answer.
Considering the above concerns, why should an investor be interested in investing in Nigeria’s oil sector?
An investor should be interested in Nigeria’s oil and gas industry, first, for the size of oil and gas production that we are capable of making possible in Nigeria. Two, the consumption. We are over 200 million Nigerians consuming different energy products from petrol to kerosene to gas. So we have the market. Third is that Nigeria provides a very excellent high return on investment value because of the cost of labour in this country that is not in any way impacting negatively on the investors for profit making. This, however, does not mean that there are no other challenges in the sector. For us as practical operators in the industry, our greatest challenge is finding funds and ensuring that regulators do not over-charge us, which is what we are seeing now. But in terms of raw materials and human resources, there is actually very little or no challenge because we have it in abundance across the country. We are not lacking in raw materials, rather we are just lacking in competent technology and know-how.
So are businesses thriving as expected in the sector?
This depends on the arm of the sector because we have downstream, midstream and upstream. In the upstream, there is no doubting the fact that you need to be there for at least two years to be able to start producing crude oil or gas that is of commercial value. In the midstream, you need to also be there for at least one full year and half. In the downstream, which consists of the retail outlets and logistics, of course, if you put a filling station of N80m in a location where you are having products to sell at an average of maybe 30,000 litres daily, you should be able to break even within seven months.
This again speaks to the high prospects in this industry and I can tell you why. Every time you hear about electric motors, solar power, or alternative energy, yes we need them but you cannot compare their quality with the quality of energy being generated from fossil fuels. So it means that there is a future. Therefore in five years, the possibility of our oil production increasing above three million barrels per day is likely. In 10 years we can start to look at how to domesticate our business effectively and run our own economy in this country, where we can be able to drill, explore, refine and export. – Culled from Punch.
