Autogas Stalls As NNPC, Marketers Bicker Over N500b Debt, Pro Rated Fuel Cost 

Despite the deregulation of the downstream sector and increase in the pump price of Premium Motor Spirit (PMS), an impending showdown, which may obstruct supply of petrol is brewing between the Nigerian National Petroleum Company Limited (NNPCL) and marketers over undelivered 202.5 million litres of product in the last eight months.

This is coming as the Federal Government’s autogas plan, piloted by the NNPCL and expected to have led to at least two million gas-fired vehicles plying roads in Nigeria faces a dead end.

These developments, alongside unfinished issues, especially government’s over N500 billion purported debt under the halted petroleum equalisation scheme would force the Independent Petroleum Marketers Association of Nigeria (IPMAN) into an emergency meeting between today and Wednesday.

Although NNPCL had repeatedly claimed to have sufficient product, especially PMS, multiple sources, told The Guardian that the national oil company had collected money upfront between October last year and last month to deliver 4,500 tankers of PMS totalling 202.5 million litres but failed to deliver. The product was paid for when the ex-depot price was N183 per litre.

Trouble started for the marketers, who claimed they have taken N37.05 billion loans with active interest, when the NNPCL asked them to pay additional money N12.7 million on each of the 45,000 capacity trucks to claim their goods.

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By implication, the market would need additional N57.5 billion to claim the products they ordered at a combined price of N37 billion. These brought the total stock from initial N37 billion to N94.5 billion as each truck now sells for N21.03 million.

Beside, there are indications that the National Union of Electricity Employees might withdraw their services in the midnight of Tuesday in compliance with strike action being planned by the Nigeria Labour Congress.

A memo of the workers dated June 2 and signed by its general secretary, Dominic Igwebike reads: “Sequel to the Nigeria Labour Congress (NLC) Emergency National Executive Council (NEC) meeting held on June 2. 2023 at the Labour house Abuja, over the sudden removal of fuel subsidy which has brought untold hardship to Nigerians as well as increased inflation in the economy, the NLC has directed that the nationwide withdrawal of Services action will commence on Wednesday, June 7, 2023.”

The investigators had questioned the marketers if they would sell the stock at the old pump price of N195 but they insisted that the NNPC had claimed it had four billion litres of PMS in stock but failed to supply the traders who in turn would pay back loans. They equally accused the company of selling old stock at new prices as well as other marketers for the purpose of being able to restock.

Some of the marketers, who pleaded anonymity while speaking directly to the claim by NNPCL Group Chief Executive Officer, Mele Kyari that the country has over four billion litres of PMS in stock said, “Can you imagine what he’s saying? So NNPC has over four billion litres and they cannot give us at the old price? Can you imagine that? So, they want us to pay additional money so that they can share the money among themselves.”

Another marketer said while they are in support of subsidy removal as it would bring a free free market economy, “Our argument is over 4500 tickets lying down at various depots since October 2022 to date June 2023.”

The marketers claimed that the monopolistic nature of the market, led by the NNPC, made businesses difficult for independent operators, who do not have credit facilities to back their operations against the major marketers who have steady supply due to their bank guarantees.

They equally claimed that the development led to the shutting down of most stations and pushed a lot of employees out of job amidst rising poverty and inflation.

“Our money has been in their custody for more months, some since January, some since February, likewise in March respectively. They are the one owing us the product and they have to give us our product,” the marketer said.

Amidst criticism over the pricing template of the national oil company, a top management member at IPMAN told The Guardian that a meeting is being convened for Wednesday but could happen earlier.

The Nigerian Midstream Downstream Regulatory Authority (NMDPRA) had said the Federal Government has brought to an end, the equalisation fund that has been in place in the last 48 years, as petrol pricing would now be determined by market realities.

But the independent marketers insisted that the Federal Government owes them an outstanding of about N500 billion. IPMAN last year, said the bill stood at around N400 billion but said the actual figure would be ascertained this week.

Although insiders at the NMDPRA had admitted that some marketers are being paid on rolling basis, they disclosed that most of the marketers were heavily indebted to the government and reconciliation would have to be done at some point.

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Meanwhile, most of the marketers, who are expected to install gas dispensing facilities across their facilities nationwide disclosed to The Guardian that the government ‘s trumpeted autogas policy was a mere promise that lacked the needed financial backing for necessary infrastructure.

In December 2020, when attempts were made to remove subsidy, former President Muhammadu Buhari promised Nigerians, especially labour leaders, that an autogas policy would ensure that vehicles plying the country’s roads run on Compressed Natural Gas (CNG), but the have become another government hot air that added to the administration’s list of failed promises.

It was anticipated that by now, two years after that nothing less than two million vehicles of the average 12 million vehicles plying Nigerian roads would be running on CNG and LPG as part of measures to mitigate the tension over the increased pump price and save the environment from hazards of PMS.

A key issue labour would hold on as they negotiate with the government, there are indications that most marketers and value chain investors did not receive the N250 billion-intervention loan provided by the Central Bank of Nigeria (CBN).

Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), which boasts of 8,000 fuel stations across the country said none of its members received the financial support.

Director, Institute for Oil, Gas, Energy, Environment and Sustainable Development (OGEES Institute) Afe Babalola University, Ado Ekiti, Prof Damilola Olawuyi, said while the Tinubu administration started off with a commendable indication of acting frankly, decisively and in a timely manner on issues of national importance, poor implementation of the subsidy removal would hurt investment climate.

According to him, the pace of announcement must be matched by rapid policy action to cushion the effect of subsidy removal of the poorest of the society, and to ensure that no one is left behind.

“The current overnight price hike and reappearance of fuel queues show the enormity of preparatory work that should have been done before now by the previous administration, and that must now be urgently done to make the fuel subsidy removal as orderly, sustainable and responsible as possible.

“Failure to do so will adversely impact our investment climate, and may further hurt the prospects of attracting foreign direct investment, and the economy as a whole,” Olawuyi said.

Professor of Economics at University of Ibadan said incentives to convert to gas-powered vehicles were not there under the subsidy regime.

“Once the subsidy goes, economic agents, including vehicle owners, would assess the relative costs of both options and choose the one that is more feasible. The higher fuel prices would trigger incentives for use of alternative fuel like electric vehicles and gas-powered vehicles,” he said.

The Major Oil Marketers Association of Nigeria (MOMAN) earlier told The Guardian that the investment was too risky as market, bankability, consistency in government policies, product plan and other elusive factors made the autogas scheme dead on arrival.

Only about three stations are operating in Abuja; two along the Airport Road and owned by NNPCL and Nipco and the other along Kubwa expressway, also owned by NNPCL.

It was gathered that existing private investors, especially Nipco and Oando, who had invested in the market segment were struggling to survive but there are indications that the new price mechanism for PMS would make the price attractive.

Renowned energy scholar, Wunmi Iledare, had described the scheme as mere political expediency, which is conflicting with economic effectiveness and efficiency, adding that the policy for gas as a transition fuel towards removing fuel subsidy “is misplaced and misleading. Hence, the failure was guaranteed from the start with no infrastructure that left much to be desired.”

“There must also be a departure from central planning of the energy sector. Things must be done according to the Act of the National Assembly,” he said.

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