Oil Sector Downstream Dollarization Policy Inimical to Investment, says Major Marketers

The country’s petroleum products distribution and supply chain may face more challenging complexities going to current foreign exchange market intricacies.

At a media forum yesterday, the Major Energy Marketers Association of Nigeria(MEMAN), complained that the perplexity of the forex market uncertainty has stopped members from embarking on Premium Motor Spirit(PMS), known as petrol importation. They said it is not easy to put together a correct mathematical calculation of the product’s landing cost to further determine the appropriate pump price.

The executive secretary of the association, Clement Isong, in sharing his member’s position on the present industry value chain conundrum said, their investment is not fully protected with the dollarisation of certain charges.

The market and consumers are not immune to government policy that allows Nigeria Ports Authority(NPA), and the Nigerian Maritime Administration and Safety Agency (NIMASA)‘s continuous charges in dollar, said Isong.

He also, informed that though marketers receive products from Nigerian National Petroleum Company Limited(NNPCL) retail, ship-ship products offload is transacted in dollars all of which pushes up the cost of the pump price.

“We are presently concerned about sustainability, efficiencies and affordability of energy for Nigerians and we are encouraging a shift to energy transition specifically into gas space.” the ES said.

Giving further analysis, Isong said though the Federal Government has been faithful in its avowed intervention process since it exited the petrol subsidy regime, the dollarization policy is weakening the industry and discouraging investment.

He placed the blame mostly on fluctuating dollar movement and the unpredictability of the rate.

For instance, he said, marketers pay NNPCL about $10 per metric ton and given the current exchange rate would translate to a higher pump price.

Analysing the forex market impact on the business, he said, in 2023 when President Bola Tinubu removed the subsidy, and with the exchange rate at that time the cost of a litre was about N4.85k and with the dollar at about N1,600 today it has added up to about N11.83 a litre, and at $30 per metric ton which was N14.54 today with the dollar at N1,600 that has pushed it up to N28.44 which is adding up to the pump price.

On the transportation side, he said, even with separate negotiations by marketers, transporters charge between N5-N8 per litre.

He said with the unbearable rising cost, the Association’s ongoing advocacy is towards leveraging gas as an alternative source of energy.

Speaking on the transition shift to gas, a consultant on Liquified Petroleum Gas(LPG), Femi Fanoiki said, efforts are currently moving towards driving LPG application in both the industrial and automotive services.

Fanoiki explained that interventions by the government are encouraging investment in that space but said more infrastructure deployment will further boost the adoption process.

Speaking on the advantages of Compressed Natural Gas(CNG), Gas and Renewable Energy Specialist at MEMAN, Adelanke Bayo-Adepoju analysed the benefits of shifting focus on CNG as an alternative to petrol.

She said concerted efforts have been made to convert about 1 million vehicles to run on fuel by 2027 and the establishment of over 1,000 conversation workshops across the country.

Clarifying the issues of return of subsidy, Isong said, the industry is witnessing consistent intervention initiatives by the government which perhaps the public may have misconstrued as subsidy payment.

He said, President Tinubu, in July 2023, promised that the administration would continue to monitor inflation and exchange rate movement and would be intervening to manage market operations to ensure energy security.

“We have seen those interventions at different times and it provides M a level of stability but our advocacy is to encourage a paradigm shift to affordable energy options ” Isong explained.