By Adedapo Adesanya
The major downstream marketers under the aegis of the Major Energies Marketers Association of Nigeria (MEMAN) have once again called for the de-dollarisation of Nigeria’s downstream supply chain.
The group said that the country’s petroleum products distribution and supply chain may face more challenging complexities based on current foreign exchange (FX) market intricacies.
The Executive Secretary of the association, Mr Clement Isong, disclosed this at a media forum on Thursday in Lagos, noting that uncertainties in the Nigerian FX market have stopped members from embarking on the importation of Premium Motor Spirit (PMS), otherwise known as petrol.
He said that it is not easy to put together a correct mathematical calculation of the product’s landing cost to further determine the appropriate pump price.
The Executive Secretary while sharing his members’ position on the present industry value chain conundrum said their investment is not fully protected with the dollarisation of certain charges.
“The market and consumers are not immune to government policy that allows Nigeria Ports Authority, NPA, and the Nigerian Maritime Administration and Safety Agency (NIMASA) continuous charges in dollars, said Isong.
He also noted that although marketers receive products from Nigerian National Petroleum Company (NNPC) Trading Limited, ship-to-ship products offload is transacted in Dollars all of which pushes up the cost of the pump price.
“We are presently concerned about sustainability, efficiencies, and affordability of energy for Nigerians and we are encouraging the shift to energy transition specifically into gas space.” Mr Isong said.
Giving further analysis, Mr Isong said though the federal government has been faithful in its avowed intervention process since it exited the petrol subsidy regime, the Dollarisation policy is weakening the industry and discouraging investment.
He placed the blame mostly on fluctuating Dollar movement and the unpredictability of the rate, saying that marketers pay government agencies like the Nigerian Ports Authority (NPA) and NIMASA about $10 per metric ton, and given the current exchange rate would translate to a higher pump price.
Analysing the forex market impact on the business, he said in 2023 when President Bola Tinubu removed the subsidy, and with the exchange rate at that time the cost of a litre was about N4.85 and with the Dollar at about N1,600 today it has added up to about N11.83 a litre.
He said for Ship-to-Ship (STS) at $30 per metric ton which was N14.54 today with the Dollar at N1,600 that has pushed it up to N28.44 which is adding up to the pump price.
On the transportation side, Mr Isong said even with separate negotiations by marketers, transporters charge between an average of N5 to N8 per litre more.
He said with the unbearable rising cost, the association’s ongoing advocacy is towards leveraging gas as an alternative source of energy.
The ES advised depot operators and filing stations to consider moving to use Compressed Natural Gas and other renewable energy sources like solar in other to break even and operate efficiently.
Clarifying the issues of return of subsidy, Mr Isong, said the industry is witnessing consistent intervention initiatives by the government which perhaps the public may have misconstrued as subsidy payment.
He said President Tinubu, in July 2023 promised that the administration will continue monitoring the effects of the exchange rate and inflation on petrol prices and when necessary, they will intervene.
“We have seen those interventions at different times and it provides a level of stability but our advocacy is to encourage a paradigm shift to reduce operating costs. Trucks are encouraged to move from diesel to CNG, depots and retail outlets to move from diesel to CNG and/or solar energy,” he explained.
Modupe Gbadeyanka