Fuel Scarcity: MOMAN demands liberalized market, internal energy shield

Sopuruchi Onwuka

Federal government should adopt the measures being deployed by countries around the world to protect their domestic economy from the prevailing energy supply shocks and high prices stoked by the ongoing war between Russia and Ukraine.

Part of the measures includes interventions in controlling supply systems, ensuring internal supply security, arresting cost and price escalation, and ensuring reliable consumption data and manageable fuel subsidies.

Chairman of Major Oil Marketers Association of Nigeria (MOMAN), Mr Olumide Adeosun, said the country’s economy requires measures that form domestic energy shield in order to insulate it from supply volatility and price shocks.

Mr Adeosun who delivered his closing remarks during an online workshop with market stakeholders, Federal Competition and Consumer Protection Commission (FCCPC) and the media, said spikes in energy prices spurred by the Russia-Ukraine war deliver direct impact on Nigeria’s domestic fuel market.

The workshop was organized for the FCCPC to sensitize major marketers group on the need for collaboration in ensuring fairness for consumers in the domestic petroleum market. The event also included a media briefing session.

Mr Adeosun who is the Chief Executive Officer of Ardova Plc also explained that the situation in Nigeria is exacerbated by slopes in domestic playground, unreliable consumption and supply data, spirals in petrol subsidy figures and rising cost of retail operations and dwindling margins.

The Oracle Today reports that the Nigerian National Petroleum Company (NNPC) Limited remains the only authorised source of petrol supply in the country. The company which is the nation’s biggest thriving public enterprise has also remained the sole beneficiary of the multi-trillion Naira annual federal fuel subsidy since the current administration of the government controlled by the All Progressive Congress (APC).

The state supply monopoly in the domestic market has made it difficult to independently verify the supply and consumption figures that base the rising annual subsidy budgets which government projects as the reason for prevailing fiscal squeeze in the economy and the persistent borrowing spree.

Our checks show that subsidy budget for petrol consumed in the domestic market has jumped from about N800 billion in 2014 to over N4.0 trillion in 2021. The subsidy toll has also shattered the commercial models for market operations, eroded marketers’ margins under fixed price regulation and also led to the prevailing scarcity as the market continues to rely on single source of supply.

Also, the figures advanced by the NNPC and the Organized Private Sector (OPS) on the nation’s average daily peak demand for petrol are miles apart. Whereas the OPS calculates about 32 million liters of petro per day, the NNPC claims that it supplies whopping 70 million liters of petrol per day.

The figures exclude other deregulated fuel products like the automotive gas oil (AGO) also called diesel, aviation turbine kerosene (ATK) also called Jet A1, household kerosene  (HHK) also called cooking kerosene, and the dual purpose kerosene (DPK) used for versatile purposes.

Mr Adeosun called for clarity of roles in the marketplace, pointing at NNPC Limited as the large elephant squeezing other occupants of the room. He demanded that the changing status of NNPC as provided in the Petroleum Industry Act (PIA) should reflect its roles in the changing domestic fuel market.

In calling for shield on the domestic energy market, Mr Adeosun pointed at the need for government adopt the prevailing global trends where governments concentrate on meeting internal energy needs by controlling legal and illegal exports. He made it clear that constant allusions to spill of subsidized fuel into neighbouring countries have invalidated official figures brandished as the basis for calculating internal consumption and subsidy claims.

He also pointed at loss of local refining capacity and the country’s dependence on foreign refineries as key cost drivers at a time of high crude oil prices. He explained that cost of massive importation raises landing cost of products, increases subsidy differentials and thins down allowable margins for retail companies.

He lamented that the margin threshold in the market has fallen below sustainable limits, a situation he added that leaves some retail operators in remote locations with no other option than breaking price caps. Key operating cost component, according to him, is diesel which is used in transporting products and powering retail outlets.

Mr Adeosun advised federal government to begin early to invest in the country’s energy security to protect the local economy from the vagaries of international oil market shakeups.

On worsening subsidy crisis in the country and associated supply disruptions, Mr Adeosun advised government to rein in subsidized Nigerian petrol from seeping into neighbouring African countries in order to lower the cost burden to manageable limits.

He strongly canvassed phased deregulation of petrol as the country begins to open up the midstream for private refining. He made it clear that the only way for supply sustainability and fair competition in the market is to liberalize the market and dismantle the subsidy conduit on the nation’s annual budgets.

To compensate for subsidy removal, he advocated channelling of subsidy funds into provision of social services, amenities and infrastructure to lower the cost of doing business and make the economy congenial for investments in local production of goods.