OIL: Subsidy by the Nigerian National Petroleum Corporation (NNPC) not sustainable

The Depot and Petroleum Marketers Association of Nigeria (DAPMAN) says the ongoing subsidy by the Nigerian National Petroleum Corporation (NNPC) was not sustainable.

Its Executive Secretary, Mr Olufemi Adewole, said in Lagos, that the rise in landing cost of petroleum products has renewed calls for full deregulation.

The group therefore, called for deregulation of the downstream sub-sector of the nation’s oil and gas industry which according to him remained the best option.

Adewole said that as private marketers continued to stay on the sidelines in terms of petroleum products importation, depot owners had reiterated the need for the Federal Government to fully deregulate the fuel market.

He said that NNPC had been the sole importer of petrol into the country for two years and that the private oil marketers stopped importation due to shortage of foreign exchange and increase in crude oil prices, which made the landing cost of the product higher than the official pump price of N145 per litre.

According to him, if fully deregulated, it will also help the government to use the subsidy money to develop other sectors. Other countries he said, sell petrol higher than Nigeria’s pump price.

The DAPPMA scribe, however, lamented NNPC’s decision to sell Premium Motor Spirit (PMS) to them at N117 per litre, admitting that the price was not only outrageous but not cost effective.

He added that the N111 per litre price, which NNPC was selling fuel to them, was at an insignificant margin, wondering what would happen when the state-run oil firm had increased the price to N117.

Adewole said NNPC’s monopoly of fuel importation had compounded their woes.

He said: “By the time depot owners, who are mostly marketers, add other costs incurred in the course of buying fuel from NNPC and later sell the product at the pump price of N145 per litre to consumers, they will be left with little or no profits.

“More worrisome is the fact that NNPC controls fuel importation, a development which has compelled marketers to sell the product at a particular price. That is the situation we find ourselves in.

“We are praying for solutions to problems inhibiting the growth of the industry, especially the downstream sub-sector,’’ Adewole said.

He said, NNPC sold fuel only to depot owners, who had Pro-foma Invoice, a development which implied that any depot owner or marketer, who does not have a Proforma Invoice would not be able to buy fuel.

He said diesel price was deregulated, noting that marketers were selling the product at between N220 to N230 per litre.

“No depot owner or marketer, he said, can say he or she is making profit under the new price regime.

“More worrisome is the fact that NNPC controls fuel importation, a development which has compelled marketers to sell the product at a particular price, that is the situation we find ourselves in,” he said.

The Executive Secretary admitted the fears expressed by depot owners over the new price regime saying, the fears stemmed from the fact that depot owners made very little profit because of the current price system.