Fuel Scarcity: Osinbajo, Kachikwu Meet With Oil Marketers

Nigeria’s Vice President, Professor Yemi Osinbajo, and the Minister of State for Petroleum Resources, Dr Ibe Kachikwu, have met with some major petroleum marketers over the issue of fuel scarcity in the country.

Dr Kachikwu said in a tweet that Monday’s meeting, which was ‘productive and collaborative’, was convened as part of efforts by the Federal Government to frontally provide the much-needed solutions to the lingering fuel availability challenges across the country.

The minister said that the government was very much aware of the difficulty Nigerians go through to get the scarce product but that it would soon be a thing of the past.

He informed the people that the government has mandated the Nigerian National Petroleum Corporation and other relevant agencies to ensure the states are flooded with the product.

“Whilst empathising with Nigerians for the needless pain and suffering that the current situation has sprung up, we expect that the fuel availability challenges evidenced by long queues will be completely eliminated, soonest.

“We are leaving no stone unturned as we continue to monitor the current fuel situation and collaboratively work with the NNPC and the Department of Petroleum Resources (DPR) to assiduously execute already communicated ministerial directives to maximally flood the market with products,” Kachikwu said.

He further thanked Nigerians for their understanding and support for the administration of President Muhammadu Buhari, adding that measures are being put in place to prevent a reoccurrence of such incident.

He said: “The bigger picture is to ensure that a repeat of the current challenge is never again experienced; I thank every Nigerian for the support even in the face of challenges. God bless you and I respectfully wish you a splendid holiday and celebration.”

In continuation of the field rounds in our bid to frontally provide much needed solutions to the lingering fuel availability challenges with the Vice President H. E @ProfOsinbajo, SAN, we engaged the Major Oil Marketers in a very productive and collaborative meeting. pic.twitter.com/DsGvkgFfQR

— EIK (@IbeKachikwu) December 25, 2017
Whilst empathizing with Nigerians for the needless pain and suffering that the current situation has sprung up, we expect that the fuel availability challenges evidenced by long queues will be completely eliminated, soonest. pic.twitter.com/9kVNfMzTMh
— EIK (@IbeKachikwu) December 25, 2017

We are leaving no stone unturned as we continue to monitor the current fuel situation and collaboratively work with @NNPCgroup and the Department of Petroleum Resources to assiduously execute already communicated ministerial directives to maximally flood the market with products. pic.twitter.com/ospL33o5V7
— EIK (@IbeKachikwu) December 25, 2017

We Can No Longer Import, Sell Fuel At N145/Litre — Marketers

Reports are rife that private oil marketers are calling for government intervention to enable them to access foreign exchange at a special rate for the importation of Premium Motor Spirit (petrol).

Private marketers who stopped fuel importation last year due to shortage of foreign exchange and increase in crude prices, said had made the current forex rates makes it unprofitable to import petrol and sell same at N145 per litre.

The Punch reports that “The National Operations Controller, Independent Petroleum Marketers Association of Nigeria, Mr. Mike Osatuyi, said, “The problem is that the importation (of petrol) is being handled almost 100 per cent by the Nigerian National Petroleum Corporation as private importers have backed out because the increase in crude price has made the landing cost enter subsidy.

“When the crude price hit $59 per barrel, we could not sell petrol again at N145 per litre if we were importing on our own. It is only the government (NNPC) that is importing and can warehouse the subsidy.

“Right now, the landing cost of the PMS is N154. If you are importing at N305 to the dollar, by the time you add bank charges, it comes to N307 to the dollar. If you apply that to the current crude price, the landing cost is N154-N155. By the time you add all the margins, the pump price is about N160-N167.

“Before private importers can resume importation, the exchange rate to a dollar must be N250 and we can sell at the price of N145 per litre.

“Landing cost of the PMS today has increased. By the time we land the product based on the international crude oil prices, petrol should be selling for between N165 and N170 per litre. But government is saying we should sell at N145. So, if there is no subsidy, we have to depend on the NNPC to give us the product,” he said.

Government, Oil Marketers And Debt Bomb

When will the government and its agencies be declared promise keeping indeed when it comes to transactions between them and other stakeholders in the polity? Industrial actions are being daily declared, suspended and called off on account of only one issue: integrity deficit on promise keeping on all fronts. This question on covenant keeping came to the fore again the other day over promised debt payment on fuel subsidy to oil marketers, an issue most citizens thought had been long settled.

This integrity issue should not be in our character as a nation. It was widely reported the other day that the Vice President, Prof. Yemi Osinbajo, had intervened to facilitate the Federal Government’s settlement of its debt to oil marketers effective July 2017. Following that intervention, the Minister of Finance, Mrs. Kemi Adeosun subsequently raised a glimmer of hope of settling some verified debts amounting to N2.7 trillion. That is why it is indeed curious that recently, the oil marketers were reported to have threatened to embark on mass employee lay-off because of government’s non-fulfillment of its promise.

What else to expect after the Vice President’s intervention and the assurance by the Ministry of Finance that N2.7 trillion would be paid? This should be a serious cause for concern that the payment is yet to be effected, a development that has triggered such a threat to stability in the sector. It is even worse that no explanation has been given for the non-payment.

The oil marketers, the primary burden bearers of government’s failure to settle the debts, had alerted the nation that if the situation subsisted longer, wholesale disengagement of their employees would be an open option for them to follow to save their businesses. This is alarming enough in a market that has been volatile.

It is important consumers and other stakeholders appreciate that, if the marketers carry out their threat, it will be an ill wind that will blow no one any good at this time. For emphasis, if nothing is done and the major marketers off-load their employees into the already saturated job market, the socio-economic implications will be quite grave.

That is why all stakeholders should call and prevail on the government to settle now its debts put at about USD 2.0 billion or N720 billion (including bank interests and exchange rate differentials) to the marketers.

Besides, government should be conscious of the enormous relief settlement of its huge debts will bring to the economy. Mrs. Adeosun acknowledged this when she confirmed that government’s payment of N2.7 trillion out of its debts would “significantly enhance liquidity in the critical sectors of the economy” and also “go a long way in stimulating economic activities.” With such knowledge, it is unclear why the government has failed to pay these debts to fast-track economic revival.

What is more, it is most likely that if the debts had been paid, the just reported growth of 0.55 per cent in the economy would have been much higher with greater positive impact too on the populace.

There are more negative implications for failing to keep the promise to marketers. For instance, banks that lent money to the marketers will continue to be over-burdened with business-constraining bad loans; customers’ deposits and the credit system will remain endangered as banks may become distressed. Besides, firms whose survival depends on the marketers and banks may not survive. And under the present economic environment, sacking of just one employee from a gainful work has more than a bad domino effect for a ‘truck-load’ of other dependents.

Beyond all these, given the reported claim that the government had contracted to settle its obligations to the marketers within 45 days otherwise it would bear accrued bank interests on funds borrowed by them (marketers) to import fuel, government should have known that non-payment will increase its liabilities as banks will continue to charge interests until such facilities are liquidated. It should have therefore, made financial and economic management sense for the government to have paid its debtors timely to avoid using scarce financial resources that could have been deployed for more meaningful purposes, for the servicing of interest charges.

On the issue of exchange rate differentials, the government and the marketers ought to have been fully aware of the market dynamics in the importation of goods. Except the government explicitly agreed to cater for exchange rate differentials (which will sign-post government as a bad risk manager), the marketers too should honourably take care of their risks.

Every artful international businessperson knows that foreign exchange risk exists. If the marketers did not hedge against such risk, they cannot drop the negative outcome of their ignorance on the laps of the government and indeed tax payers. And so if the exchange differentials had favoured them, would they have credited the value into government’s coffers? But given the dramatic and serious change in the exchange rate of the Naira to the Dollar, the government and the marketers should dialogue for a win-win solution. In this instance, it is the magnanimity of the government that can be pleaded for. Nevertheless, if the government agreed to bear such a risk, it should be bound by its undertaking.

All told, it will be in public interest that government resolves the debt challenge urgently to revamp the economy and prevent further pressures and frustrations on the citizens. If, for instance, the problem of fuel scarcity re-surfaces at the filling stations, it will aggravate intolerable and overwhelming socio-economic order. And a situation whereby the nation is gravitating towards the Nigerian National Petroleum Corporation (NNPC) being the sole importer of fuel into the country suggests that avoidable danger is being nursed. But the danger will manifest the day the Corporation is unable to meet its fuel supply requirements. At such a point, long queues will surface, man-hours will be lost, and an already agitated populace may unleash mayhem. These are preventable by empowering the marketers to join hands with NNPC to keep the fuel pumps flowing until local refining of crude oil becomes a sustainable reality.

Finally, the government had earlier indicated it would issue bonds to raise funds to pay its due debts. This option is urgent and should be properly implemented. There should be no fear that it could fuel excess liquidity in the economy. Certainly, the bonds option will avail the government a long enough time to re-order its finances before they (bonds) are mature for repayment. Mindful that the present bond rate is high, government should sequence the bonds in manners that their repayment when due will not become another source of embarrassment. And so the expectations of the people on this score should not be cut off. Government should be exemplary in keeping its promises to the people and institutions. That is what enhances trust being the building block of credibility.

 

 

Source: The Guardian