Oil marketers have said the inability of the Federal Government to unveil legislation that will support claims of deregulation shows that it is still flirting with subsidy, and might be unwilling to adjust prices when oil prices hit certain benchmarks.
Besides, the operators said it would be unfair for government to remain a regulator and market player at the same time, thus giving it undue advantage over other players.
Speaking during a webinar on, “Downstream Petroleum Market Deregulation: Prospective Impact on Nigerian Economy Post COVID-19,” organised by Financial Energy Review in collaboration with Leadgrid Series, Chairman of the Major Oil Marketers Association of Nigeria (MOMAN), Adetunji Oyebanji, said for investments to thrive in the industry, operators need stability and proper market assessment.
Oyebanji equally decried the losses suffered by marketers as a result of the recent reduction of the pump price of Premium Motoring Spirit (PMS) also called petrol, to N121 from N145 per litre by the Federal Government.
According to him, operators lost N10billion to the adjustment, even as they added that the federal government only removed subsidy on petrol, and has not deregulated the sector.
On his part, the Managing Director, Rainoil Ltd., Gabriel Ogbechie, noted that the past three months has been very tough for the economy, adding that the drop in oil prices affected operators that had stock their filling stations before the lockdown started as products were bought at higher prices.
“The fact that PPPRA decides the price of fuel does not denote deregulation. We may be flirting with some bit of subsidy. I don’t see marketers going to import petrol but depend on the NNPC. The Petroleum Equalization Fund (PEF) does not have a place in a deregulated market.
“There has never been a scarcity of diesel. If government allows petrol to be deregulated, there will be an initial teething problem but it will be addressed in due course once it is settled”, he added.
On her part, the Head, Downstream, First Bank Nig. Ltd., Oluwatoyin Aina, urged operators to diversify their sources of foreign exchange for fuel importation in order to hedge against scarcity and unstable rates.
“The initiative for deregulation is a good one but we need a monetary mechanism to support operators in the sector. Competition helps the growth of the industry. Nearly 50 per cent of forex is diverted to meet importation of petrol.
“The main source of forex for the country is crude oil. We need to diversify from that to be able to move forward. We need to intensify value addition of our raw materials before being exported.
“Critical infrastructure needs to be put in place to address gaps in production chain. Marketers should explore opportunities in the agriculture sector to diversify their earnings. Forex volatility affects operators in the value chain. We sell forex hedges to customers but it is not enough and margins are easily eroded. While marketers buy their dollars upfront and cash back it, they need to diversify their earnings,” she added.
Meanwhile, Oyebanji insisted that “We need our refineries to be put in place, and Dangote Refinery is coming up, but we need more refineries so that we can reduce the pressure on our foreign exchange reserve.
“Players in the market need to know when to stock and when not to stock products because we may have lost up to N10billion when those prices were reduced recently. That doesn’t encourage investors.”