Fuel scarcity hits Lagos, Ogun, as NNPC denies hike, marketers threaten back out of importation over forex volatility

Oredola Adeola

The fuel supply crisis has escalated in Lagos and other parts of Nigeria, with long queues reminiscent of the pre-subsidy removal era, this is just as the Nigerian National Petroleum Company (NNPC) Limited has stated that it has no plans to increase the pump prices of Premium Motor Spirit (petrol) as widely speculated, while licensed petroleum product marketers have threatened to back out of importation due to foreign exchange volatility, which is preventing them from closing business deals with suppliers and banks.

The Nigerian National Petroleum Company Limited (NNPCL) in a statement via its official Twitter handle stated that it has no intention to increase the retail price of petroleum. This was in response to rumors that the pump price of petrol would increase to between N680/litre and N720/litre in the coming weeks.

NNPC, therefore, encouraged its customers to patronise its retail stations nationwide offering the best quality products at the most affordable prices.

The decision of oil marketers in Nigeria to back out from importation due to mounting challenges in securing foreign exchange to import fuel, is likely to create a huge petrol supply shortfall in the country, leaving only the Nigerian National Petroleum Corporation (NNPC) as only importer of petrol.

Kunle Durojaiye, an oil & gas analyst & strategist, characterized the petroleum product market in Nigeria as a “price modulation” market, emphasizing that the intentions of the NNPC to retain the current price, hold no significance to the market dynamics.

According to Durojaiye, the price of fuel is determined by two key factors: the import price in dollars per metric ton ($/MT) and the exchange rate, with any increase in either factor resulting in a price increase.

EnergyDay correspondent who monitored the situation on Monday reported that the fuel scarcity in Lagos has caused long queues of motorists in major filling stations, especially in NNPC retail outlets in Ikeja, Ikorodu road, and other parts of Lagos Mainland.

Most of the filling stations owned by independent marketers were under locks and keys, as some of the managers and officials who spoke with EnergyDay revealed that the market has been very hostile to the independents, insisting that the landing cost of petrol is around N650 per litre, which when added to another additional cost would likely end at around N680 or N700 per litre depending on the distance from the depot.

They claim that a truckload of PMS (33,000 litres) is now selling at above N19,000,000 plus other charges, including freight from the depots and other logistic costs.

They also noted that the business environment is very harsh on operators, and most of the major importers who obtained foreign exchange at the parallel market are selling above the current market price because of their inability to source dollars at the official window to facilitate the importation of petrol.

They, however, revealed that selling between N580 to N630 per litres is not possible, suggesting that they can only make a profit if the product is sold between N680/litre and N720/litre in the coming weeks.

Some importers who spoke with EnergyDay on Monday said that they cannot make a profit, settle their suppliers, and banks in a volatile foreign exchange market situation where the naira is exchanged to a dollar and is traded from N910 to N950 at the parallel market.

Joseph Ehimen, Chairman of the Lagos Chapter of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), in a chat with EnergyDay expressed concerns about the state of the petroleum industry downstream sector.

He said that despite the removal of the petrol subsidy, the sector has returned to a monopolistic market, lacking the right business environment and incentives for operators to freely operate in a fully deregulated market.

Ehimen however criticized the government for not addressing issues of favoritism and corruption, which he believes are still prevalent in the sector. He argued that the promised removal of subsidy has not been sincere and that the same problems continue to hinder the sector’s progress.

The PETROAN Chairman called on the government to prioritize tackling corruption and creating a favorable business environment.

Timileyin Ajose, a Petrol Depot Manager in Satellite Town, Lagos informed EnergyDay that the price of petroleum products will increase due to the high crude oil prices in the international market.

He explained that since the market is now deregulated and market-driven, it is wrong for anyone to resist the hike because, with rising crude oil prices and Naira depreciation, the petroleum products’ pump prices will be impacted.

Ajose asked Nigerians to adjust to the market dynamics, recommending switch alternative and cheaper energy sources to ease the energy crisis resulting from the hike in fuel.

He emphasised that if the global price of crude oil comes down, the pump price will also go down, which is a phenomenon in different parts of the world.