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Oil Marketers Call For Dedollarisation Of Downstream Supply Chain

The Executive Secretary of the Association, Clement Isong spoke at a media forum organised by the association on Thursday in Lagos.


A file photo of tanker drivers

 

The major downstream marketers under the aegis of the Major Energies Marketers Association of Nigeria, (MEMAN), have said that the country’s petroleum products distribution and supply chain may face more challenging complexities going by current foreign exchange market intricacies.

The Executive Secretary of the Association, Clement Isong spoke at a media forum organised by the association on Thursday in Lagos.

Isong complained that the complexities of the forex market uncertainty have stopped members from embarking on the importation of Premium Motor Spirit, PMS, otherwise known as petrol.

He said that 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 while sharing his members’ position on the present industry value chain conundrum said their investment is not fully protected with dollarisation of certain charges.

According to him, “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, continuous charges in dollars, said Isong.

He also, informed that though marketers receive products from Nigerian National Petroleum Company Limited, NNPCL Trading, ship-to-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 the 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 dollarisation 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 Government Agencies (NPA, NIMASA, etc) 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 exchange rate at that time the cost of a litre was about ₦4.85 and with the dollar at about ₦1,600 today it has added up to about ₦11.83 a litre, and for STS at $30 per metric ton which was ₦14.54 today with the dollar at ₦1,600 that has pushed it up to ₦28.44 which is adding up to the pump price.

On the transportation side, lsong said even with separate negotiations by marketers, transporters charge between an average of ₦5-₦8 per litre more.

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

Isong advised depot operators and filing stations to consider moving to use Compressed Natural Gas and other renewable energy sources like solar in other to break even and operate efficiently.

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 will continue monitoring the effects of the exchange rate and inflation on gasoline prices and when necessary, they will intervene.

“We have seen those interventions at different times and it provides a level of stability but our advocacy is to encourage a paradigm shift to reduce operating costs. Trucks are encouraged to move from diesel to CNG, depots and retail outlets to move from diesel to CNG and/or solar energy.” Isong explained.

Speaking on the transition shift to gas, Femi Fanoiki, a consultant on Liquified Petroleum Gas, LPG, 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), Adelanke Dayo-Adepoju, Gas and Renewable Energies Specialist at MEMAN analysed the benefits of shifting focus on CNG as an alternative to petrol and diesel.

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.