Fuel importation: New players rival NNPC

One thorny issue that continues to raise everyone’s dander up in a manner of speaking is the issue of fuel pump price.

The reason for this is not far to seek: once the pump price of fuel goes up or there is induced scarcity of some sorts, everything else literally goes south be it price of essential commodities, including consumables, household items just as cost of essential services like transportation, rent, medicare, to mention just a few hits the rooftop.

Interestingly, since the subsidy on petroleum products was removed and a new price effected since early June, Nigerians have had to bear the brunt, albeit grudgingly despite blessed assurances that things would ease off in no time.

It was therefore a rude shock when the nation woke up to the news of further hike by the Nigerian National Petroleum Company Limited (NNPCL) which readily blamed market forces for the turn of events.

NNPCL age-old monopoly

The NNPCL has served as Nigeria’s sole importer of petroleum products, especially the Premium Motor Spirit (PMS) from time immemorial as other oil marketers stopped importing the commodity due to their inability to access the required foreign exchange at the official window.

Not at ease with NNPCL monopoly

Meanwhile, some members of the Major Oil Marketers Association of Nigeria also said access to dollars remained the challenge and that marketers who wanted to import already had the licence.

Echoing similar sentiments, the immediate past chairman of MOMAN, Mr Adetunji Oyebanji, who is the Managing Director, 11 Plc (formerly Mobil Oil Nigeria Plc), said, “As an operator in the industry, we welcome the idea that import licenses would be granted. The truth of the matter is that they never really stopped granting import licenses. The only reason people could not make use of them was because they did not have access to foreign exchange at the same rate the NNPCL had.

“That means if one wanted to import fuel and one’s rate was higher than what NNPCL was getting, then obviously, one would not be able to compete when one brought in the product. So, the truth is that we would come back to the market if we have access to foreign exchange at the same rate the NNPCL has.”

He said if other people could import the product; it would remove the NNPCL monopoly and make fuel readily available. “But, issues around access to forex are not really clear. This is because, in the past, the CBN governor has said he didn’t have any forex to give us. We wish they changed that situation and improved the structure,” he added.

Also a highly-placed source in MOMAN said, “We never had a problem with import licenses. I think there was a breach in communication to the general public. That importation is open to anybody who can import fuel, the industry knows that that is half of the story. The other half of the story is around the FX issue.

“If I were to look at it from their point of view – and I am not holding brief for either the NNPCL or NMDPRA – they have both spoken within the scope of their offices. The FX issue is not really theirs to solve. That is a ministry of finance issue and a CBN policy issue to solve. In a way, if you are to take them exactly by what they said, they have spoken like government persons.

“The other piece is to hear from the CBN governor or the ministry of finance to understand how that will be dealt with. I think what the NNPCL has control over is crude oil, not FX. It is that crude oil that is being traded, and in the accounting, when they are working out the subsidy account, they use the official rate.”

He said unless there was a policy shift that would allow credible persons that have importation licenses and have proven track record in fuel importation to have access to crude, which they could use to generate the FX that they needed, many marketers might not embrace the idea.

He added, “The reality of the matter is that there is an uneven playing field because of the access to crude. NNPCL is more advantageous in terms of importation and that is why it is happening, and the other players don’t have the same opportunity to import. There is a dominant player in terms of importation.”

When asked what he felt could be done, he said, “The first thing is to give a percentage that, for example, MOMAN members could import this particular percentage. I think we need a framework that really shows the build-up cost for everything. We need to make it in a way that NIMASA, NPA and all other charges are transparent to all the players.”

“One of those charges is paid in dollars. That increases the cost of bringing the product in. The jetty you deliver to, the port you deliver to also matter. The system has to be transparent by creating equal opportunity. The regulators should be clearer with these things; else the operators won’t be able to compete.”

As oil marketers made their demand to start PMS imports, the NMDPRA explained that it would no longer fix prices or release templates for petrol anymore.

Enter Emadeb Energy Services Ltd

After what seemed almost impossible, Energy Services Limited finally broke the jinx this week, when it succeeded in importing about 27 million litres of petrol into the country, making it the first private company to do so in the post-subsidy regime.

Speaking at the company’s jetty in Lagos on Wednesday, Adebowale Olujimi, Emadeb’s Chief Executive Officer, said the product arrived in a cargo valued at over $17 million.

Prior to the development, the NNPCL was the sole importer of petrol in the country.

Olujimi explained that the decision to import the goods was motivated by the necessity to strategically position the company to capitalise on the potential made possible by the new marketing regime.

“The value of this cargo here, you cannot find it in the market just like that. It is over $17 million and you can’t in any way, with what the FX is today. Today, we have imported 27 million litres of PMS, but local refining is the way forward for us in this country,” he said.

“We want to be one of the early comers into this game. In conjunction with some of our trading partners, we decided to source for the licences and that is what has brought us here today.

“Petrol importation is not a sustainable way for a country to run. From what we saw yesterday when the PMS price rose to over N600 per litre, it is an indication that the dynamics of the business is a tough one. It requires huge US dollars to bring in this. The way forward is for local refineries to be revived,” he said.

Also speaking at the occasion, Farouk Ahmed, Chief Executive Officer of the NMDPRA, said the development was significant because the downstream industry has been deregulated.

Represented by Sadiq Bashir, NMDPRA’s Executive Director of Corporate Services and Administration, Ahmed said Emadeb had shown a business model that could be successfully applied in the country.

“The significance of this is the fact that deregulation has been embraced and subsidy removal is a thing of the past. Not only that, it showed that working together as stakeholders in the industry, we can actually diversify the supply of this very important source of energy for the country,” he said.

Thumbs up for Emadeb Energy Services

As to be expected the inauguration of the first petrol cargo by Emadeb Energy witnessed stakeholders from all walks of life who thronged out en masse to welcome the historic occasion.

Amongst these were players in the oil and gas industry, bankers and investors alike.

Stakeholders laud liberalisation of petro import

While assessing the new development, Olawale Afolabi, the Secretary General of the Nigeria Union of Petroleum and Gas Workers (NUPENG), said that deregulation had helped in opening up the market.

Describing the concerted efforts made by Emadeb Energy as commendable, Afolabi said it would positively impact the sector.

Deregulation, he said, should be based on local production, stressing that “the huge price increase in petrol is affecting Nigerians, as the international market cannot be determined by the government.”

He however, urged investors to come and invest in the refining, so that Nigeria can have local refineries.

Also commending Emadeb for commencing importation under the post subsidy removal regime, Mr Mike Osatuyi, Operations Controller of the Independent Petroleum Marketers Association of Nigeria (IPMAN), said the era of monopoly is gone for good.

An elated Osatuyi, who described the coming of Emadeb as a breath of fresh air, said, price will be more competitive because there are more players in the market.

“The process will be more transparent than that of the NNPCL, where money is paid and products are not allocated for five months. I urge the government to quicken the palliative for Nigerians to have relief. Government should use the money saved from subsidy and forex to do something reasonable for Nigerians,” he stressed.

On his part, Mr Gabriel Ogbechie, Managing Director, Rainoil Ltd., lauded Emadeb for importing products after the subsidy removal.

He said that the company had set the pace in the importation process.

“Deregulation is workable and the way to go.

“There are so many challenges in the downstream sector including forex instability, which moved to N835 to dollar.

“There are huge fluctuations in the system but deregulation is the best way to go.

“The process will be competitive under deregulation, if the prices drop, petrol will also drop,” he said.

The marketer said that floating exchange rate was the right thing to do because the huge disparities between official rate and black market rates were not sustainable.

He urged the government to provide liquidity to the market to ease importation.

“If the government does not provide liquidity, this fluctuation will continue,” he added.

More players enter the fuel import business

Indications from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) is that over 56 companies had applied for import licences to bring petrol into the country, however six oil marketers will start importing petroleum products in July, its CEO, Farouk Ahmed, had confirmed.

He said apart from the six firms, a number of companies have applied for permits.

“There are several companies that applied for fuel importation permits. So, you can apply for importation to get access to the port. And by the way, we are open to all those who are interested in importing,” he said.

“We have guidelines which are not very stringent because we are trying to encourage importation.

“There are six companies who said they want to import fuel in July. Of course, all the others may import in December, in November, or anytime but those who expressed interest to bring in fuel in July there were six of them.

“The beauty of it is that there are interests which mean that they have been able to have access to foreign exchange in order to import.

“Now, as we go along, of course, we’ll be briefing you on the progress or the achievements so far, but the important thing is that NNPCL has 30 days of fuel sufficiency, so we do not anticipate any gap in supply or in distribution.”

Ahmed also denied claims that the NNPCL had given approval to Dangote Group to import petroleum products, saying the company has no power to give such a directive.

Just as oil marketers made their demand to start PMS imports, the NMDPRA explained that it would no longer fix prices or release templates for petrol.

The NMDPRA boss explained in a statement that under the liberalised market, market forces were allowed to dictate prices.

He said, “We put the regulation in place, we make sure quality control is complied with, we make sure the product is there and we give licence to a prospective importer.

“The market is now open for everybody that wants to import as long as they meet all the requirements. So, it is not about the NNPC alone. For everybody in the sector, we make sure we guide their operations whether at the depot or wherever the product is.

“But we will not put a cap to say this is what the price must be. As far as we are concerned in the NMDPRA, this is not like before when the PPPRA (Petroleum Products Pricing Regulatory Authority) fixes the price. In a deregulated market, it is the market force that dictates the price.”

Ahmed explained that the NNPCL’s role was to fix the prices of the petrol it imported and not take over the responsibilities of the NMDPRA.

“In the case of the NNPC, the organisation is the sole importer at this point. We told the NNPC to recover its costs because they know how much it cost them to import the product and sell it. Of course, we also know how much shipping, offshore, ex-depot and ex-pump are. But we cannot tell them to sell at a price because the market is deregulated,” he said.

According to Ahmed, the Federal Government had officially scrapped petroleum equalisation as well as the national transport allowance.

He also stated that the NMDPRA and the Federal Competition and Consumer Protection Commission would mount aggressive monitoring of activities in the downstream sector to prevent profiteering by petroleum marketers.

Ahmed said marketers were now free to source their foreign exchange anywhere around the world to import petroleum products and then recover their costs without impediments.

On where the importers would source their forex from, Ahmed said, “No, the CBN (Central Bank of Nigeria) will not give dollars to anyone because it is an open market. Anyone willing to import should get the dollars from anywhere to import.

“Anyone willing to open a letter of credit from any part of the world can do that to import. That marketers can source their forex from anywhere is the beauty of the liberalised market that the NMDPRA has introduced based on the provision of the law.”

Peoplesmind