The phasing out of the Premium Motor Spirit (PMS) subsidy has saved Nigeria the embarrassment of unending queues around retail outlets as speculations of imminent pump price increase have lost the potency for triggering significant panic buying, JOHN OFIKHENUA reports
As unstable, dreaded and persistent as the Premium Motor Spirit (PMS) petrol market headache was till May 29, this year, Nigerians were optimistic that, at last, the removal of its subsidy would halt all the associated pain of payment of the subsidy support.
In the coming months, the Federal Government was already heaving a sigh of relief as it saved N400 billion monthly from the courage of halting the age-long payment.
Besides, the eye-catching reality of declining petrol consumption volume excited the government. It was an indication that the courageous phasing out of the payment paid off after all.
Since the government also unified the exchange rates, it fascinated importers of PMS to secure licenses from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).
In a jiffy, they joined the hitherto sole importer of the product, the Nigerian National Petroleum Company Limited (NNPCL) in the business. The operators were jubilating that the Petroleum Industry Act (PIA) which has since August 2021 paved the way for them to remain only at the mercy of demand and supply was eventually in force. They cheered up over the industry’s full deregulation.
That ecstasy was, however, short-lived. Although the customers were enduring the petrol pump price of N540 per litre with the veneer of hatred, they patched along.
As of August, market fundamentals fueled by soaring exchange rates jacked the price to N617/litre. From murmuring, this triggered audible complaints before the straw that broke the camel’s back, the news that the pump price would hit N700 per litre. However, with a listening ear, the government skillfully halted the soaring wings of the pump price hike.
Thus, on August 15, President Bola Tinubu’s Special Adviser on Media, Mr. Ajuri Ngelale said: “The President wishes to assure Nigerians, following the announcements by the Nigerian National Petroleum Company Limited (NNPC), just yesterday that there will be no increase in the pump price of petroleum motor spirit anywhere in the country.
“We repeat, the President affirms that there will be no increase in the pump price of petroleum motor spirit.”
President Tinubu also acknowledged that there are inefficiencies within the downstream sector that are contributing to the fuel price controversy. He assured that all loopholes associated with the smooth delivery of petroleum products in the country will be addressed without delay.
“The President also wishes to affirm that there are currently inefficiencies within the midstream and downstream petroleum sub-sectors that once very swiftly addressed and cleaned up will ensure that we can maintain prices where they are without having to resort to a reversal of this administration’s deregulation policy in the petroleum industry.”
Consequently, this announcement edged private imports out of the business since they reasoned they would not recoup their money under a sealed pump price regime. They thus quietly quit from further petrol importation.
Similarly, the President of the Nigerian Association of Road Transport Owners (NARTO), Alhaji Yusuf Lawal Othman issued a press statement calling on the Federal Government to remove the 7.5 per cent Value Added Tax (VAT) charge on the Automotive Motor Spirit (AGO). According to him, since the marketers could not hike pump prices, there was no way for an increase in haulage cost.
His words: “This is because without looking at the pump price, marketers cannot increase transportation price. And if they do not do that, we have no choice but to continue to park. And if we continue to park, it will create unwanted disruption of supply and we don’t want that.”
He expressed concern that the cost of operation in the face of a sealed price was unbearable, urging the government to quickly remove the VAT charge.
Othman said: “We are talking about an immediate solution. The instant intervention is the removal of 7.5 per cent VAT on the diesel because it is increasing the cost of the diesel. NARTO is complaining that the high cost of diesel is unbearable.”
Again, President Tinubu removed the VAT charge on diesel to ease its impact on its costs and that of petrol. Since the implementation of the PIA which abhors government regulation of petrol prices is in force, Tinubu intervenes in checkmating whatever acts as a catalyst to petrol pump price hike.
Despite this intervention, the petrol price still wants to surge in a hurry. It wants to slip out of control. As of early October, the marketers would not heed to the plea not to further increase the pump price. While some closed shops, others radically adjusted their pump prices above the N617/per litre. While some marketers said only N630/litre in the Federal Capital Territory (FCT) could be cost-reflective, others insisted that the PIA should run its full course. In other words, petrol should sell as much as N1000/litre.
In the next weeks, aside from the NNPCL retail outlets, only a few independent marketers could cope in the business. It was evident that the product was getting scarce. The first to cry out was the Natural Oil and Gas Supplier Association of Nigeria (NOGASA).
Its President, Mr Benneth Korie said depots were deserted, retail outlets were shutting and petrol tanker drivers were parking their trucks down for the unsustainable cost of doing business.
Seeking urgent government intervention to save the market from total shutdown before December, he warned that there may be no petrol in Nigeria in January should the government fail to address the challenges of reducing the cost of diesel before 2023 ends.
He said: “NOGASA is seriously worried that between now and December this year, in the absence of government’s urgent intervention, the increasing loss of lives, businesses and jobs with the accentuation by mass shut of filling stations and packing up of petroleum tankers, all due to unattainable high cost of importation, lifting transportation and distribution of petroleum products.”
In the meantime, as the groaning under higher prices persisted, the President of the Petroleum Retail Outlet Owners’ Association of Nigeria (PETROAN), Mr. Billy Harry told The Nation on the phone that accessing the product had become taxing.
He attributed the dearth in supply to a lack of access to the product at the depots. According to him, apart from the NNPCL’s, all other tank farms were dry. The PETROAN boss also attributed the situation to difficulty in accessing foreign exchange and the transaction circle of petrol importation that takes some time.
On why PMS was getting scarce, he said: “I said earlier that every import transaction is dollarised. And we are running an economy that is based on the Nigerian naira. So, every import must have to be equated with dollar value. The dollar value every day is eating into the naira efficiency.
“Today, you cannot get one dollar for less than N995. So, there is no way you can have a little of the product for less than that amount and then you are not going to be able to sell above that price (N617/litre) to make a profit.
“So, clearly, those who have been given licenses could not import if they did not have foreign exchange to back their transactions. That is just the simple reason.”
Similarly, the National Secretary of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Chief John Kekeocha explained that only NNPCL could sell the product for N617 per litre. According to him, at a point, only AYM Shafa was the only independent marketer vending the product for N617 per litre as others had hiked the prices to N619 to N625/litre. He also blamed the increase on the cost of diesel.
He said: “In Abuja, since yesterday (Tuesday) many filling stations shutdown, including A.Y Shafa. But later in the evening, they started selling. It changed its pump to N625. I don’t know any other station that is still making sales.
“The scarcity is because many independent marketers are not selling. And even the tank farm owners, it is only Shafa that I know who is selling. I don’t know of any other one.
“The product is not much there and the cost of landing the product is quite high because the cost of diesel is very high. A litre of diesel is above a thousand naira.
“For you to move a truck of fuel for instance from Warri to Abuja, you will be talking about N300,000 or more.
“I wonder how many people will make that expense and still come and be selling about N600 or there about.”
On whether the government has not moved against those selling above the official pump price, he said the government has been silent about it perhaps for its inability to cushion the cost of diesel.
“I am sure that adjustment is to accommodate the cost of landing, which the government is silent about because they (the government) cannot make provision for diesel. The government cannot cushion the difference.
The only marketers who might cope with the prevailing prices were those close to the depots.
According to him, their expenditure on diesel was minimal.
Okeocha said: “The diesel cost is high and therefore that makes the landing cost of the product very high, especially at far places…Areas such as Lagos and others can afford to sell at the normal price because the proximity of the source of the product is close.
“They will not incur much cost in diesel. But those who are selling like those staying in Maiduguri, Katsina, Kano Abuja and others, you cannot tell them to sell within N600 or N610 because the landing cost of the product is high because of the high cost of diesel. So, the government is not saying anything about that.”
As most of the marketers have opted out of the business, NNPCL, the single importer of the product, has insisted the product is enough in stock.
Responding to The Nation’s inquest on why PMS was getting scarce, NNPCL Head of Corporate Communication, Iyabo Ojo noted that the company had a product that could last 30 days.
“We have about 30 days sufficiency; so supply isn’t an issue. Road conditions have, however, made trucking quite challenging for all marketers,” she said.
She also attributed the apparent scarcity of PMS to the deplorable condition of the roads which made haulage of the product hectic for marketers.
Despite the gloomy scenario, the removal of subsidies has recorded some enviable gains. Not only the smuggling of the product has reduced, but other evidence of the gain is that neighbouring countries are weeping over President Tinubu’s action.
In addition, phasing out subsidies has checkmated the lifestyle of reckless consumers of the product. This has freed the roads of vehicular congestion and minimally reduced fossil fuel emissions.
The greatest gain so far is the controlled consumption figure. Although the NMDPRA has not opened up the average volume consumed in the country daily, it is obvious that the figure keeps crashing daily.
To further earn public confidence, the NMDPRA needs to lay bare the country’s average daily PMS consumption figure. This can encourage the enduring citizenry that their patience pays. Again, Nigerians are already upbeat that savings from subsidy removal will be deployed to massive concrete road construction across the country.
Above all, the removal of subsidies has saved the country the embarrassment of endless queues around petrol stations across the country. For the higher pump prices, speculations about imminent further hikes no longer induce significant panic buying.
Thus, it is obvious that the government needs to put on a thinking cap to arrive at measures that can reduce the pump prices for the benefit of the citizens.
