Marketers to forfeit about N16.5bn in subsidy to hoarding

Petroleum marketers may have to forfeit about N16.5 billion in possible subsidy claims due to oil price increases at the international market due to hoarding of product, which they preferred to call inventory stock.
The Petroleum Products Pricing Regulatory Agency, PPPRA, in a document obtained at the weekend, titled: “New Framework for Petroleum Products Supply, Distribution and Pricing – May 2016,” put total subsidy accrued from April till date at N16.5 billion.
But the losses are more than made up by the high inventory level built at the time of the sudden pump price increases in premium motor spirit, PMS, also called petrol.
At the new pump price of N145/L, marketers are more than willing to forfeit any subsidy claims prior to the price increases as they were already reaping about N58.50/L against the previous pump price of N86.50/L. As a result, less N13/L, the marketers still have a handsome excess profit of N45.50/L
It was gathered that subsidy levels as at May 6, had reached the N13/litre mark before the Federal Government made the sudden announcement of N145/L for petrol on May 11. This is to avoid further accumulation since there was no provision for subsidy in the 2016 national budget.
Neither the Department of Petroleum Resources, DPR, nor the Petroleum Products Pricing Regulatory Agency, PPPRA, the industry regulators has offered any figure on the inventory level at the time of announcement of the pump price change. But it was learnt that this was already running into billions of Naira, as daily accumulation is put at N520 million i.e. 40 million litres x N13.
Product hoarding helped to build inventory levels, especially as marketers were expecting early announcement of the pump price increase, which came five days later, a development that led to the resurgence of long queues at filling stations nationwide.
Some marketers, who spoke in confidence, said: “PPPRA was about to come and take stock at the tanks and depots, but they were told to forget it as the announcement was expected to be made that evening. So nobody actually came to take the inventory.”
Against this backdrop, the marketers admitted that “No marketer has the moral right to go claim subsidy for 2016 no matter how small, because they have gained on inventory. The
Besides, he noted, the minister’s announcement was in breach as according to him, “There was not supposed to be any announcement; the trigger we were all expecting was for PPPRA to change their template. The change in template would have triggered all of us into action and if anybody had asked, we would have referred them to the PPPRA template. Somehow, Kachikwu (Minister of State for Petroleum), decided it was best for him to talk.”
Already the astronomical profits, which the marketers are reaping at the expence of Nigerians, now bearing the burden of almost 80 percent price increases without notice or attendant palliatives have already miffed the Trade Union Congress, TUC.
The TUC has called for status quo ante or risk nationwide strike, even as other industry unions, the Petroleum and Natural Gas Senior Staff Association of Nigerian, PENGASSAN, and its junior counterpart, National Union of Petroleum and Natural Gas Workers, NUPENG are seen to have let the masses down by supporting the price increases.
TUC argued that it was preferable that government added the N13/L subsidy accruable, which would have brought pump prices to about N99.50/L than the additional N58/L inflicted on Nigerians.
Apart from the 80 percent pump price increases, the fact that marketers were told to source for their foreign exchange, forex/FX from secondary sources is another cause for worry, as this has further devalued the Naira.
As at Friday, the Naira exchanged at N360 to $1, against N289 at the time of the price increases at the parallel market. To this extent, pump price should be actually higher than N145/L, which the PPPRA even alluded to on its website at over N243/L.
This means that if oil prices rise higher than current levels to possibly above the $50/barrel mark as being expected, then Nigerians would be subjected to further fuel pump price hikes.
The inability of the Federal Government, through the Nigerian National Petroleum Corporation, NNPC, to acquire forex at official rate of N197/$1, compounded the petrol scarcity situation in the country.
However, another marketer argued that this may not necessarily be so, saying: “If oil price rises significantly, then we will go back to government to talk. Significantly levels would be above N5/Litre differential, but that will be an internal discussion because we have accepted that this system has come to stay, and we are going to work with it and make sacrifices here and there.”
reason is because on the day of the announcement was made, everybody had product (petrol) in their tanks, which means that there was some inventory.”
Speaking in defence of the hoarding of product, one of the marketers, who preferred anonymity said: “It was not intentional at all. What happened was that we were loading out to petrol stations and there was this confusion, because the announcement should have been made last week Saturday (May 6), so some marketers were waiting for the minister (Petroleum Resources) to make the announcement.