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Thursday, May 23, 2024


Energy Marketers Bemoan Dollarisation Policy In Downstream Petroleum Industry, Says, It Hinders Investment

 Olushola Bello

Major Energy Marketers Association of Nigeria,( MEMAN), has explained one of the challenges that has kept its members off from engaging in the importation of Premium Motor Spirit or petrol.

According to the association, the uncertainty surrounding the foreign exchange market stopped its members from fully engaging in the exercise, adding that the country’s petroleum products distribution and supply chain may face more challenging complexities going by this development.

MEMAN disclosed this at a media forum organized for Energy Correspondents to further educate them on the benefits of Compressed Natural Gas to the Nigerian economy if the country embraces the commodity to fuel their vehicles and also for other uses.

On what the landing cost of petrol is currently, the executive secretary of the association, Clement Isong, said it is not easy to put together a correct mathematical calculation of the product’s landing cost to determine the appropriate pump price.

While sharing his member’s position on the present industry value chain conundrum, he said their investment is not fully protected with dollarization of certain charges.

The market and consumers are not immune to government policy that allows the Nigeria Ports Authority, NPA, and the Nigerian Maritime Administration and Safety Agency, NIMASA, continuous charges in dollars, said Isong.

He also informed that though marketers receive products from the Nigerian National Petroleum Company Limited, NNPCL retail, ship-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,” he said.

Giving further analysis, Isong said though the Federal Government has been faithful in its avowed intervention process since it exited the petrol subsidy regime, the dollarization policy is weakening the industry and discouraging investment.

He placed the blame mostly on fluctuating dollar movement and the unpredictability of the rate.

For instance, he said marketers pay NNPCL 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, the exchange rate at that time, cost N4.85k  on a liter  and with the dollar at about N1,600 today it has added up to about N11.83 a liter, and at $30 per metric ton which was N14.54 today with dollar at N1,600 that has pushed it up to N28.44 which is adding up to the pump price.

On the transportation side, he said even with separate negotiations by marketers, transporters charge between N5-N8 per liter.

He said with the unbearable rising cost, the Association’s ongoing advocacy is towards leveraging gas as an alternative source of energy.

Speaking on the transition shift to gas, Femi Fanoiki, a consultant on Liquified Petroleum Gas, LPG, said efforts are currently moving towards driving LPG application in both the industrial and automotive services.

Fanoiki, explained that interventions by the government are encouraging investment in that space but said more infrastructure deployment will further boost the adoption process.

Speaking on the advantages of Compressed Natural Gas, CNG, Adelanke Bayo-Adepoju, a Gas and Renewable Energy Specialist at MEMAN analyzed the benefits of shifting focus on CNG as an alternative to petrol.

She said concerted efforts have been made to convert about 1 million vehicles to run on the fuel by 2027 and the establishment of over 1,000 conversation workshops across the country.

Clarifying on the issues of return of subsidy, 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 would continue to monitor inflation and exchange rate movement and would be intervening to manage market operations to ensure energy security.

“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 affordable energy options” Isong explained.

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