The Nation Newspaper

Tag: fuel

  • MRS Oil Nigeria: Losing fuel

    MRS Oil Nigeria Plc’s high financial leverage continued to compound its sluggish business performance, underlining a complex situation that has, in recent years, continuously decimated the profitability and returns of the petroleum-marketing company.

    Audited report and accounts of MRS for the year ended December 31, 2012 showed that the company remained under extreme pressures from its dependence on bank loans, the resultant high interest expense and less-than-optimal turnover.

    While turnover grew by 11.5 per cent, an increase of 163 per cent in interest expenses overran the profit and loss accounts, leading to declines of 73 per cent and 67 per cent in profits before and after tax respectively. The worsening bottom-line passed on to shareholders, with further reduction in cash dividend by about 67 per cent.

    However, one-third reduction in outstanding loans relieved the edgy balance sheet position. While total assets dropped by about 24 per cent, total liabilities declined by 32 per cent, leaving the company in better financing position. Modest improvement in working capital and lower gearing ratio underlined a commendable balance sheet restructuring, although it still remained substantially susceptible.

     

    Financing structure

    Total balance sheet size stood at N55.6 billion in 2012, indicating a drop of 23.5 per cent from N72.7 billion recorded in 2011. Balance sheet size was depressed mainly by 32 per cent decline in current assets from N49 billion to N33.2 billion. Long-term assets had slipped from N23.7 billion to N22.4 billion.

    Meanwhile, total liabilities also dropped by 32 per cent from N53.71 billion to N36.54 billion. Current liabilities had declined by 36 per cent from N46.76 billion to N30.1 billion, reflecting similar decline in bank loans from N21 billion in 2011 to N13.46 billion in 2012. While the paid up share capital remained unchanged at N127 million, some 254 million ordinary shares of 50 kobo each, total equity funds inched up from N18.99 billion to N19.05 billion.

    The decline in loans and current liabilities and the stability of the equity funds mixed into better financing structure. Debt-to-equity ratio improved from 111 per cent in 2011 to 71 per cent in 2012. The proportion of equity funds to total assets also improved from 26 per cent to 34 per cent.

     

    Efficiency

    MRS undertook major staff downsizing in 2012 as average number of employees nearly halved from 203 persons in 2011 to 109 persons in 2012. Staff costs declined correspondingly from N1.53 billion to N812.7 million. Average staff cost per employee dropped slightly from N7.51 million to N7.46 million. Notwithstanding the restructuring, staff performance and productivity as well as general cost efficiency were relatively weak. Average contribution of each employee to the bottom-line halved from N6.96 million in 2011 to N3.48 million in 2012. Without the huge interest expenses, other costs were still slightly higher. Cost of sales and operating expenses amounted to 99.2 per cent of turnover in 2012 as against 98.8 per cent in 2011.

     

    Profitability

    MRS suffered considerable decline in profitability in 2012 with both outward profit and loss figures and underlying indices crashing to new lows. Average pre-tax profit per unit of sales dwindled from N2 in 2011 to 50 kobo in 2012 just as average return on each unit of N100 assets slumped from N1.90 to 70 kobo. The negative bottom-line performance was mainly orchestrated by significant increase in interest expenses, which overwhelmed the headroom created by modest growth in sales. Total turnover rose by 11.5 per cent from N71.49 billion to N79.73 billion. Top-line performance was driven largely by about 20 per cent increase in premium motor spirit from N49.15 billion to N58.92 billion. Total turnover was moderated by substantial declines in automotive gas oil, which dropped from N7.28 billion to N6.28 billion and dual purpose kerosene, which dropped from N2.54 billion to N1.71 billion.

    With 14.5 per cent increase in cost of sales from N64.67 billion to N74.02 billion, gross profit dropped by 16.3 per cent from N6.82 billion to N5.71 billion. Total operating expenses however decreased by 15.6 per cent from N5.98 billion to N5.05 billion. Non-core business income was almost flat at N1.07 billion compared with N1.09 billion in previous year. Finance expenses jumped by 163 per cent to N1.36 billion as against N517 million in previous year, laying the foundation for significant declines in pre and post tax profits. Profit before tax slumped to a low of N379 million in 2012 compared with N1.41 billion in 2011 while profit after tax dropped from N616 million to N205 million.

    Underlying fundamentals of the company were generally on the downtrend. Gross profit margin dropped from 9.5 per cent to 7.2 per cent. Profit before tax margin slipped to 0.5 per cent as against 2.0 per cent. Return on total assets dropped from 1.9 per cent to 0.7 per cent while return on equity dwindled to 1.1 per cent compared with 3.2 per cent recorded in previous year.

    The low profit performance depressed actual dividend payouts and the sustainability of even such payouts. With basic earnings per share dropping from N2.43 to 81 kobo, the company reduced dividend by the same margin. Gross dividend dropped from N178 million to N59 million, representing a dividend per share of 23.34 kobo for the 2012 business year as against 70 kobo paid for the 2011 business year. Dividend cover also dimmed from 1.94 times in 2011 to 1.37 times in 2012. Net assets per share was flat at N75.02 in 2012 as against N74.76 in 2011.

     

    Liquidity

    The liquidity position of the company meanwhile improved considerably during the period. Current ratio, which fundamentally indicates the ability of the company to meet emerging financing obligations, improved from 1.05 times in 2011 to 1.10 times in 2012. The proportion of working capital to total turnover also improved from 3.1 per cent to 3.9 per cent. Debtors/creditors ratio stood at 41 per cent in 2012 as against 52 per cent in 2011.

     

    Governance and structures

    Formerly known as Chevron Oil Nigeria Plc, MRS Oil Nigeria is owned by about 24,000 shareholders. One of the major downstream oil companies, MRS Africa Holdings Limited (Bermuda) holds 60 per cent majority equity stake in MRS Oil Nigeria while ZSL holds 7.71 per cent equity stake. Sundry Nigerian individuals and institutions hold the remaining 32.3 per cent equities. While the board has remained stable, the management of the company has seen many chief executives in recent period. Alhaji Sayyu Dantata, who doubles as the Chief Executive for MRS Oil Group, still chairs the board of MRS Oil Nigeria.

    Meanwhile, Mr Paul Bissohong was appointed the acting managing director following successive resignations of Mr Shardhashis Prasad and Mallam Musa Yahya.

     

    Analyst’s opinion

    The latest earnings report further underlines the need for a thorough review of not only marketing and financing strategies but also the long-term business growth strategy. While it made commendable effort to reduce short-term indebtedness, the company needs to still undertake substantial deleverage. Besides, it needs to develop a sustainable sales growth and cost management strategies to stabilise earnings and break the chequered trend that has marked the performance curve over the years. The overall performance outlook raises the urgency of a deeper restructuring.

     

  • Two in prison over N1.8b fuel subsidy scam

    The police have stepped up investigations into the alleged involvement of two persons in a N1.8 billion fuel subsidy scam, spokesperson of the Special Fraud Unit (SFU) of the Police Command, Ikoyi, Lagos, Ngozi Isintume-Agu, a Deputy Superintendent (DSP), said yesterday.

    A Magistrate’s Court in Apapa, Lagos, last week, remanded two suspects in the Ikoyi Prison for allegedly defrauding “the government of Nigeria” of about N1.8 billion in 2011.

    The suspects, Samuel Owa, 55, the Managing Director/Chief Executive Officer of Stonebridge Oil Limited and Olori Onassis Wajutome, 38, a worker with Vibrant Ventures, were arraigned before Magistrate Martins Owumi.

    They were arraigned by the SFU following their indictment by the team of auditors of the Presidential Committee on Verification and Reconciliation of Fuel Subsidy Payments.

    The committee alleged that Owa defrauded the Federal Government of Nigeria of a total sum of N1,784,715,258.14 by pretending that the company had imported and sold 15,000 metric tonnes of Premium Motor Spirit (PMS) under the Fuel Subsidy Regime of the 2011 fiscal year.

    The committee further alleged that Wajutome, a cargo Superintendent of the Vibrant Ventures, a warehousing agent appointed by Ecobank Plc, bankers and financiers of Stonebridge Oil Limited, for the importation of the PMS, aided Owa in committing the alleged offence.

    Magistrate Owumi remanded them at the prison till the adjourned date – June 24.

  • Fuel scarcity looms as NUPENG plans strike

    Barring last minute intervention by the Federal Government and other stakeholders in the oil sector, oil workers may soon plunge the nation into another season of fuel scarcity.

    The workers under the aegis of the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) yesterday vowed to embark on a nationwide strike over the casualisation of labour and non-payment of severance benefits to workers in the oil and gas sector, and gave 14-day ultimatum for the Federal Government and National Assembly to address the problem.

    NUPENG President, Comrade Igwe Achese, at a news briefing in Lagos during the Central Working Committee meeting of the union, said although oil workers’ strike would have a negative effect on Nigerians and their businesses, they have to bear the pains because a sacrifice must be made towards achieving any good thing, and that the suffering oil workers are also Nigerians.

    The union urged a national conference to resolve the challenges facing the oil and gas sector in Nigeria, since the management of Agip, like some other oil firms, have rebuffed the intervention of the Nigeria National Petroleum Corporation (NNPC) on workers’ issues.

  • Fuel subsidy stays, says Presidency

    Fuel subsidy stays, says Presidency

    THERE is no plan to remove the subsidy on petroleum products, the Presidency said yesterday.

    President Goodluck Jonathan, at a March 19 event in Lagos, spoke of his administration’s plan to remove the subsidy after consultations with Nigerians.

    Jonathan, who spoke at the Nigerian Summit 2013, organised by The Economic Conference, said subsidy of products constitutes a waste of resources that should be channelled elswhere.

    Apparently thinking that the Federal Government may remove the subsidy on April 1, workers’ umbrella bodies – the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) – have scheduled a protest for April 10.

    But, the government said yesterday that there was no such plans. The President’s Special Assistant on Public Affairs, Dr. Doyin Okupe yesterday explained why his boss broached the idea of subsidy removal at the Lagos event.

    According to him, it was only an “intellectual contribution” to discussions by the President at the Summit.

    He said sufficient provision had already been made for fuel subsidy in the 2013 Budget. “Therefore, there is no cause to assume that the President will act against the budget he presented to the National Assembly.”

    Okupe added that the administration would always engaged the various stakeholders in dialogue on issues relating to the oil and gas industry, with the view to reaching consensus on such issues.

    The statement said: “Contrary to speculations in the media and assumption by certain groups within the polity, the Presidency has stated that the removal of oil subsidy is not on the table of the transformation agenda of the President.

    “A statement made by President Jonathan at the recent Economic Summit held in Lagos was a frank, intellectual and well articulated contribution by the President to the discussion on the Nigerian economy and not an indication that government was planning to remove subsidy from petroleum products.

    “The President and this administration are not insensitive to the plight of the Nigerian masses and will continue to pursue and execute policies and programmes that are in the overall interest of majority of Nigerians and that will bring the greatest good to the greatest number of our teeming population.

    “While noting that Nigeria spends about N1 trillion, an equivalent of about 20 per cent of the national budget on fuel subsidy, government remains committed to the welfare of the common man who unfortunately does not benefit optimally from the subsidy regime.

    “Finally, for the avoidance of doubt and at the risk of being repetitive, this administration is not considering the issue of removal of fuel subsidy in the nearest future and will continue to dialogue with all stakeholders with a view to reaching sustainable consensus on all issues involved in the proper management of the nation’s oil and gas industry.”

  • Chanchangi decries high cost of fuel

    Chanchangi airline has decried the high cost of aviation fuel in the country, describing it as a major setback for domestic airline operations in the country.

    The Lagos Station Manager of the airline, Mr Babadiyia Ahmed, made this known to aviation correspondents in an interview in Lagos. He said about 70 per cent of the operational cost of airlines in the country was for aviation fuel.

    According to Ahmed, a litre of aviation fuel JET A1 costs between N160 and N180 per litre, and that this has greatly affected operations in the country’s local route. He added that the government in the past tried to find solution but nothing came out of it.

    He urged the government to look into the challenges of aviation fuel and resolve it for the advantage of both the airlines and the travelling public.

    Ahmed noted that airline business was always dull in the first quarter of every year as low traffic were recorded during the period.

    He said Chanchangi airlines was overcoming its problems with arrangement concluded for the arrival of its own aircraft, adding that Owerri and Port Harcourt routes, which the airline has been operating before the problem will be added as soon as the aircraft arrived.

  • ‘Nigeria loses 50% of its fuel to diversion’

    ‘Nigeria loses 50% of its fuel to diversion’

    Despite its dependence on imported fuel to meet local consumption, about 50 percent of Nigeria’s petroleum products are diverted by dishonest marketers and transporters to the neighbouring countries, it was learnt.

    Investigation by The Nation showed that the development had been responsible for the recurring shortage of petroleum products, especially premium motor spirit (petrol) and the resultant scarcity experienced.

    Scarcity of fuel, which lingered for very long time towards the end of last year, particularly in Lagos and Abuja despite the efforts of the Nigerian National Petroleum Corporation (NNPC), led to discovery of how the fuel meant for consumption in-country was diverted to the neighbouring countries.

    A top official of the NNPC said at the peak of the fuel scarcity last year, the corporation was concerned because there was no reason for the scarcity. The official said although it was attributed mainly to the vandalised System 2B pipeline at Arepo axis in the Obafemi/Owode Local Government Area of Ogun State, which is a key distribution facility, the corporation knew well it was supposed to have sufficient reserves. It was for this reason that the corporation carried out an internal investigation and found out that the products were diverted.

    The official said the corporation, therefore, adopted a concept tagged ‘tracking.’ The initiative ensured that all petrol imports made were monitored very closely and tracked to the point of consumption, which resulted in amazing revelation that about 50 per cent of the country’s PMS was diverted.

    The official said: “It might amaze you that about 50 percent of our fuel was diverted. You also might have observed that before Christmas and through the festive periods until now, there has not been a report of scarcity. It was no magic and we didn’t increase the volume of the imports we used to make in the past, yet retail outlets have been wet with products. It is the result of the tracking policy that we adopted.

    “In addition, the NNPC is still the sole importer of fuel as marketers have backed out since the beginning of last year. Don’t mind any marketer who tells you that he imports fuel. The truth is that NNPC imports and give them (marketers) to ensure even distribution.

    “Since we introduced the tracking strategy, it has plugged most of the leakages and the corporation sustained its import volume, which has ensured uninterrupted supply of fuel for Nigerians.”

    Oil marketers had, after the aborted downstream sector deregulation in January, last year, which shot pump price of PMS from N65 a litre to N97, stopped further importation on the grounds that the Federal Government owed them over N200billion in arrears of unpaid subsidy refund.

    Although the government has begun to pay the debts gradually, it is done under tight control, which ensures that only genuine marketers are paid claims for refund of subsidy.

    Nigeria depends on imported fuel, which is complemented by unsubstantial percentage, refined in-country by the almost dysfunctional refineries.

     

  • Fuel price increase‘ll trigger violent protest, NLC warns

    Fuel price increase‘ll trigger violent protest, NLC warns

    A  violent protest will be triggered should the government increase fuel price as it did early in the year, Nigeria Labour Congress (NLC) President Abdulwaheed Omar has said.

    But Omar said he did not see the government hiking the fuel price because it understands the hardship Nigerians are going through.

    Government would have spent over N1 trillion at the end of this year, to subsidise petrol, which it says it could no longer afford.

    Omar, speaking in an interview with the News Agency of Nigeria (NAN) in Lagos, said already the masses were facing a lot of hardship, adding that the government would not want to add to their suffering.

    “Generally, Nigerians should expect a good year in 2013. We don’t expect sudden surprises from the government like we had early this year.

    “I don’t think government will be disposed to doing that because if you look at it, the hardship Nigerians are enduring now is slightly higher than what they were enduring at the end of last year.

    “So, I think it will be unthinkable for government to want to compound the problems of the common man.

    “So, let us hope that 2013 is going to come with good hopes and with a lot of prospects for everybody in this country.’’

    The union president said Nigerians should not expect anything from the NLC, but should hope on many good things from the government.

    Omar urged the government not to sack any worker, saying that it would not solve Nigeria’s economic problems.

    He advised the government to tackle the unemployment problem in 2013, saying that it would be a major yardstick for measuring the country’s development.

  • Fuel subsidy and Jonathan’s surgery

    Fuel subsidy and Jonathan’s surgery

    It wasn’t many weeks after the crown settled over his ears that President Goodluck Jonathan, and perhaps some of his minders, knew that Palladium would be a lifelong opponent. The columnist’s grouse is of course not congenital; it was triggered by the president’s disagreeable worldview that sees him being shifty when firmness is desired and rigid when compromise is required. Even before the election that enthroned him was conducted, this column had concluded that the president, who was then an acting president, would win, but would be incapable of governing with the innovativeness and discipline a harassed and broken nation needed. The columnist, readers will recall, had endorsed Mallam Nuhu Ribadu for the presidency, but also concluded that the young man’s time was not yet, for too many things were loaded against the uppity anti-graft czar, not least his age, judgement, and frequently misplaced candour . I am happy to restate that the president has not made a disciple of me.

    I single out for consideration today Jonathan’s fuel subsidy removal policy. Speaking a few days ago while receiving the report of the graduating participants of the Senior Executive Course 34, 2012 of the National Institute of Policy and Strategic Studies (NIPSS), Kuru, at the Presidential Villa, the president insisted that what was left of subsidy must be removed in order to free the industry and attract investors. It was an inelegant perspective couched allegorically in patient-doctor format. Hear him at his rhetorical best: “Why is it that people are not building refineries in Nigeria, despite that it is a big business? It is because of the policy of subsidy, and that is why we want to get out of it. To change a nation is like surgery. If you have a young daughter of five years who has a boil at a very strategic part of the face, you either, as a parent, leave that boil because the young girl will cry or you take the girl to the surgeon. So, you have the option of just robbing mentholatum on the face, until the boil will burst and disfigure her face, or you take that child to the surgeon. On the sighting of a scalpel of the surgeon alone, the child will start crying. But if she bears the pains, after some days or weeks, the child will grow up to be a beautiful lady.”

    Not only has the president determined that the subsidy problem is a boil, he has also concluded that it is located on the face. He also assumes that the boil was left untreated until it became ripe and reached the ugly dimension he talked about. Finally, he assumes that the patient cannot have a second opinion, and that the surgeon is competent enough to make the incision required to prevent scarification. But suppose the so-called boil is only imaginary and indeed psychosomatic? Suppose the patient is a haemophiliac or a diabetic? In Jonathan’s allegorical world, we are after all permitted to cavort among many suppositions. Judging from his antecedents and his responses to Nigeria’s enduring problems and challenges, Jonathan cannot, however, be supposed to be a qualified surgeon, let alone one whose diagnosis is accurate. In January this year, in his attempt to perform surgery on this same boil of his finding, he almost decapitated the national head. In surgically addressing a boil he says is strategically placed on the face – thank God he sees us as a potentially beautiful girl – how can we be sure he will not remove an eye?

    Has Jonathan treated the cancer that has made our roads death traps? Has he tackled the security problems in the Northeast and all over the country? Has he responded well to the decay in the education sector, the misery in the health sector, and the confusion in transportation and electricity generation and distribution sectors? He pursues boils but leaves cancers and cardiac problems unattended. He is preoccupied with saving a girl’s pretty face when the patient is suffering from the far more devastating afflictions of leukaemia and haemophilia. The fact staring us in the face is that in his allegorical world, Jonathan seems more appropriately a self-trained nurse who has picked up bits and pieces from eminent surgeons during ward rounds. He depends on the apolitical Dr Ngozi Okonjo-Iweala for his knowledge of economics, though the economic orthodoxy she purveys has doubtful utility for Nigeria’s unique cultural, social and political milieux. In her first coming, she was obsessed with the desire to pay off the country’s debts; in her second coming, she is now obsessed with the countervailing desire to acquire debts. She reminds us of the illustrious and self-satisfied Chief Olusegun Obasanjo who at his first coming was obsessed with nationalising what he described as the commanding heights of the economy, and at his second coming was so fixated with privatising everything we briefly feared he would privatise the presidency or the country itself.

    There is not only no convincing proof of the existence of fuel subsidy, as the trial of the so-called subsidy thieves has indicated, it is also clear that neither Jonathan nor his favourite aides and mannequins in the oil sector have given us statistical illustration of what is happening in the industry in terms of production, consumption and refining. Nigeria’s oil industry is so immersed in confusion and inefficiency that it must require extreme arrogance and insouciance for the government to focus only on the financial rewards of removing the subsidy, and ignoring the unsavoury fact that the burden of such removal will be borne mainly, if not only, by the poor. The surgeon-general has spared no time to consider the consequences of the subsidy removal, nor even talked about it, except to refer to it in exasperating tones. Never has a government anywhere, not even in autocracies, sailed near the wind as recklessly as the Jonathan government and his colluding cabals. The poor are overtaxed, over-levied, can’t afford school fees for their children, have no access to decent or qualitative healthcare, and have no access to housing. They are left hungry, isolated and dangerously alienated.

    President Jonathan fancies himself a political, developmental and financial surgeon, and is impatient with any talk of second opinion. He wants to railroad his patient into surgery, in the tenuous hope that the patient will not die on his poorly equipped operating table. He knows the threat from the Nigerian Labour Congress (NLC) is mere noise, and he believes the Save Nigeria Group (SNG) has discredited itself by its indiscriminate accusations and hysteria. He is convinced it would be a mark of courage to defy the patient’s alarm and to proceed urgently to surgery, and in 10 years, as he said at another forum, Nigeria would enjoy a turnaround. He will probably expatiate on this wild and unsubstantiated optimism in today’s presidential media chat. But there is nothing he says that will persuade us he has the discipline and the team to remake Nigeria. Except to the jobholders around him, everyone knows his government lacks the depth and initiative to snatch the country from the jaws of poverty and underdevelopment.

    Sadly, now, there is nothing anyone can say to persuade Dr Jonathan that the world is not flat, as his subsidy theory imagines, or that the consequences of subsidy removal, which he and his aides deigned to give only palliative gestures, would not far outweigh the benefits his economists talk about. We hope it is not superfluous to remind him he is a democratically elected president, and that that singular fact makes it obligatory for him to convince us of the existence of a subsidy regime in the downstream sector of the oil industry, and that that subsidy is of such magnitude that except we did away with it, we could not hope to prosper. We may not trust that he would grasp what we readily see, namely that an indifferent and illogical policy issuing from him could mix lethally with an impoverished and alienated public to produce such effects as no revolution is sufficient to mimic. But we have a responsibility to restrain this eager surgeon, lest he make an incision purporting to save a girl’s pretty face only to destroy the patient, and with her, bring an entire republic down.

  • Fuel sells for N120 per litre as scarcity persists in Lagos

    A litre of petrol sold for N120 per litre in Lagos yesterday as many filling stations closed shop for lack of product, an indication that fuel scarcity in the state is far from over.

    The Nation’s investigation showed that most of the filling stations along the Lagos-Ibadan Expressway, from Lagos toll gate, Ojota, Ogudu Expressway Way, including outlets owned by the majors such as Total, Conoil and MRS were out of stock. The few that sold such as Amo Oil adjusted their pump price to N120 for a litre as against N97.

    Although some filling stations such as Total Association Avenue in Ilupeju and Mobil along Agidingbi and Oregun Road were dispensing at N97 per litre, The Nation gathered that in many parts of Lagos, most filling stations were dry.

    The refusal of marketers to import fuel as a result of the government’s reluctance to pay their over N200 billion subsidy reimbursement for the products imported, and the vandalisation of a major product distribution pipeline, Line 2B, at Arepo in Ogun State, have been blame for the scarcity of fuel in Lagos in the past two weeks.

    The oil marketing groups including the Major Oil Marketers Association of Nigeria (MOMAN), Depot and Petroleum Products Marketers Association (DAPPMA), Independent Petroleum Marketers Association of Nigeria (IPMAN), and Jetties and Petroleum Tank Farms Owners of Nigeria (JEPTFON), said they will have a meeting this week to deliberate on their next action toward recovering their money from the government.

    The Director, Department of Petroleum Resources (DPR), Mr. Osten Olurnsola, at an a meeting, appealed to them (marketers) to step up product supply especially as the festive periods approach.

    He said: “We are approaching the end of year with the expected usual surge in social and festive activities. The attendant elevated quest for consumption of petroleum products cannot be over-emphasised. We wish to encourage marketers to ensure product availability to the public at this critical period. Marketers are strongly advised not to engage in acts that may lead to creation of products scarcity, and other associated ills such as hoarding and product diversion for profiteering.”

    Spokesman of the Nigerian National Petroleum Corporation (NNPC), Mr. Fidel Pepple, said the corporation is collaborating with the security agencies to fix the Arepo pipeline seriously damaged by oil thieves who also shot dead three employees of the Pipeline and Products Management Company (PPMC), a subsidiary of NNPC.

  • Fuel scarcity… return of a monster

    Fuel scarcity… return of a monster

    From Lagos to Maiduguri, Sokoto to Port Harcourt, Ilorin and Yola, the tales are similar. The pumps are running dry. Nigerians are at the mercy of black marketers, who smile home after selling petrol at cut-throat prices. Yet, concerned agencies appear helpless in their search for an enduring solution, writes BUNMI OGUNMODEDE

     

    ABOUT three weeks ago, residents of Abuja and its environs woke up to discover that many of the fillings stations had no Premium Motor Spirit (PMS), popularly called as petrol to dispense from the pumps.

    Rather than disappear, what began like a moonlight tale in the Federal Capital Territory (FCT) had spread like a fire in the harmattan haze to other parts of the country, pushing the price of the product much higher than the approved pump price for a litre.

    In a move to stave off a nationwide scarcity, Finance Minister Dr Ngozi Okonjo-Iweala recently relocated to Lagos. Her mission was to persuade oil marketers to shelve their plan to shun the importation of refined products.

    Members of the Major Oil Marketers Association of Nigeria (MOMAN) are bitter that the Federal Government has defaulted in reimbursing them with the investments they sunk into fuel importation, even after the verification of subsidy claims by appropriate regulatory agencies.

    Such investments, they argued, were secured as loans from financial institutions and the interests would continue to mount for as long as they delay in paying back.

    Despite the queues for products at the filling stations, the Nigerian National Petroleum Corporation (NNPC) claimed it has enough stock at the depots to meet consumers’ demand for one month.

    It blamed the long queues on what it called ‘artificial scarcity’, urging Nigerians to avoid panic buying.

    The lingering scarcity, which found its way to the Southwest states last week, crept into Lagos, Nigeria’s industrial hub, last weekend, with many stations running out of supply.

    On Monday, Lagosians woke up to see long queues at the filling stations. Some motorists, out of desperation, bought fuel from the black market for as much as N200 per litre as against the official price of N97.

    In Ondo and Ekiti states, price has gone up as high as N150 a litre at filling stations. The black marketers are at liberty to fix their own prices.

    The situation is worse in the North where a four-litre gallon sold for N700 yesterday.

    Across the country, more filling stations are joining by the day the growing numbers of outlets  displaying the “No fuel” notice.

    Major highways and streets in city centres have become sale points for black marketers, who are seen lining  the roads with kegs and beckoning on motorists to patronise them.

    Isiaka Yahaya, Auditor-General of the Sahara Unit of Petroleum Tanker Drivers (PTD), said the scarcity might linger in Lagos for some time.

    According to him, the refusal of marketers to import product is behind the scarcity. Yahaya said that the marketers could not import petrol because of the government’s failure to settle the marketers’ subsidy claims.

    But the NNPC, through its acting spokesman Fidel Pepple blamed it all  on the destruction of the corporation’s pipeline by oil thieves at Arepo,  Ogun State.

    Pepple said the corporation has not been able to repair the damaged pipeline following the killing of three of its engineers by hoodlums, suspected to be bunkerers.

    The engineers were deployed to fix the vandalised pipeline. Pepple warned that the scarcity, though artificial, might persist if adequate measures are not put in place by the authorities to guarantee the safety of its officials.

    According to Pepple, the development has forced the corporation to bridge products by trucks as against the pipeline.

    He said the NNPC was forced to the shutdown System 2B – a major pipeline that evacuates between nine to 11 million litres of fuel from Lagos to Ibadan, Ilorin and the North, due to serious vandalism by the oil thieves.

    He said: “The NNPC is bridging products from the depots at Atlas Cove, Satellite and Apapa to Ibadan, Kwara and other Southwest states. But it is a little difficult to bridge as much as 11 million litres of fuel per day through trucks, which ordinarily is easily done through pipelines.

    “Besides, the repairs of the vandalised pipeline may take some as the corporation would not risk the lives of its engineers in a bid to fix a pipeline, until their safety is guaranteed.”

     

    Beyond the NNPC explanation

     

    There is more to the scarcity than the claim that the damaged pipeline is the cause.

    Yahaya alleged that only one depot in Apapa was loading trucks with the product.

    He said: “Out of the more than 10 depots in the area, only one was loading trucks and the loading capacity is going down daily.

    “Before, 200 trucks were loading, but now, hardly would 60 trucks load in a day.”

    He urged the Federal Government to engage the marketers and other stakeholders in the sector in dialogue to ease the suffering of Nigerians.

    The National Union of Petroleum and Natural Gas Workers (NUPENG) also urged the Federal Government to call on the NNPC and its Petroleum Pipeline Marketing Company (PPMC) subsidiary to repair the vandalised pipeline at Arepo.

    Lagos zonal chairman of NUPENG Tokunbo Korodo, who made the call, warned that the tank farms in Lagos were drying up as a result of the disagreement between the Federal Government and oil marketers who have not been importing enough fuel in recent times.

     

    NNPC still owing FAAC N351b

     

    The NNPC has so far paid N99 billion in 13 installments into the Federation Account. The payment is the refund of the corporation’s outstanding debt which now stands at N351 billion.

    The debt arose in the aftermath of a forensic audit, which discovered that the NNPC had, at various times, shortchanged the federation to the tune of  N450 billion.

     

    Call for a summit to end scarcity

     

    As Nigerians groan under a fresh round of fuel scarcity across the country,  former Kwara State Governor  Dr Bukola Saraki is calling for a stakeholders’ summit to find a lasting solution to the problems surrounding the oil subsidy regime.

    Saraki, who is the Chairman of the Senate Committee on Ecology and Environment, was the first to raise the motion for the investigation of the subsidy regime in the upper chamber of the National Assembly.

    According to him, with the ongoing experience of Nigerians,  the time has come for a serious dialogue among the stakeholders.

    He said: “The facts are very clear now that it is a difficult issue. What the government should do is to convene an all-stakeholders’ meeting involving the government, oil marketers, labour unions among others to discuss the way forward because we can’t run away from this thing, otherwise we will continue to have scarcity.”

     

    Subsidy claims for

    2011 cleared

     

    Going by the records made available by the Federal Minsitry of Finance, N259.3 billion, being the outstanding subsidy claims for 2011 had been cleared by August. Additional N78. 8 billion was paid in respect of this year’s outstanding.

    Twenty-four marketers, whose claims were verified, shared N78, 899,342, 509.65. The 2011 outstanding claims of N259, 339,041,657.85 was paid to 79 companies on August 22.

     

    Why marketers

    shun importation

     

    As of the last count, the Ministry of Finance has an outstanding debt of N100 billion to pay fuel importers and oil marketers from the 2012 Appropriation.

    The non-reimbursement of the subsidy claims to the importers, who has been cleared by the Petroleum Product Pricing and Regulatory Agency (PPPRA) has widened the  gulf between the government and the companies.

    Already, the importers have not only been incapacitated to import PMS, but facing intense heat from their creditors who demand the repayment of their loans and the accumulated interests.

    A MOMAN source, who pleaded for anonymity, said:  “It is not that we are not importing, but who would risk massive importation of refined products when huge debts are still hanging and remain unsettled by the Federal Government? This explains why the terminals are not filled to capacity.”

    The source blamed the scarcity being experienced nationwide on the delay in settling the outstanding debts.

    He said: “While the Federal Government is too slow in its verification exercise, the banks are happy with skyrocketing loan facilities. The same government is not ready to provide guarantees that they will be responsible for the accumulated bank charges.”

     

    Dilemma of Dr. Okonjo

     

    Although, the minister had at a parley she held with oil marketers  penultimate week, assured the verified outstanding would be cleared, but the reality that the N888 billion appropriated for fuel subsidy in the 2012 Budget is grossly inadequate is becoming clearer by the day.

    The only option open to the former Managing Director of the World Bank is to go cap-in-hand to the National Assembly for more funds.

    But as the eye of the world financial regulators, including the Brentwood Institutions, it is unthinkable that an internationally-acclaimed economic expert will indulge in budget deficit.

    The advice from the institutions is that developing countries should avoid running a deficit budgetary system.

     

    The PPPRA intervention

     

    A number of policy changes were carried out by the PPPRA’S Executive Secretary, Mr. Reginald Chika Stanley, who was appointed in November 2011.

    Stanley’s reforms are designed to  bring stability into the supply and distribution of petroleum products  by ensuring availability.