The payment of workers’ salaries by the government and other businesses may be impossible if subsidy on Premium Motor Spirit, popularly called petrol, continues, the National President, Natural Oil and Gas Suppliers Association, Bennett Korie, tells Okechukwu Nnodim in this interview, among other industry issues
The reason why you are having a scarcity of petroleum products, particularly in Abuja is a result of the high cost of diesel. The price of diesel today in the market is N850/litre. You will also agree with me that the money being paid as bridging claims to transporters is not enough. The price is N850/litre and you are giving your driver 1,200 litres from Lagos to Abuja, if you do the calculation you will find out that the landing cost (for transporting the fuel) is about N40/litre. So if you add that to the price of PMS that you bought at the depot and you sell it here, it will be too high. So if your cost of bringing it in is at N40/litre and you bought it at N155/litre, when you add this you will get N195/litre. But you are to sell at N165/litre. So who will do that kind of business? It is already a loss-making business. So even with the bridging claim you will not be able to get the product to Abuja. Therefore the answer to your question is, diesel is the reason for the queues, the price is too high – N850/litre as at today in the market.
As far as I am concerned nothing for now. The only way out, if you want to know, is that they (government) should increase the price of fuel a little to reduce the money spent on PMS subsidy. If they can increase fuel price a little, I know Nigerians will not be happy to hear this, but this is the only solution. They should increase the price of fuel a little so that the savings will enable the Central Bank of Nigeria to have enough foreign exchange. You and I know that we import everything now in Nigeria. Diesel is an imported product and it is fully deregulated. So the importers are not getting dollars at the official CBN rate to import diesel. Everybody is going to the black market to get dollars to import their products and so you expect the price of diesel to be high.
But what we are saying now is that if you can bring down the rate at which the foreign exchange is used, it will help other businessmen who import diesel to bring in products at low prices. So you need to increase fuel price a little in order to ensure that the dollars spent in importing petrol is reduced and there will be enough forex for importers of diesel and this will cut down the price of diesel.
This is because in Port Harcourt you have depots and ports there. So since the ports are there, transporting products from there to your stations is not much. But in this case you are talking about Lagos to Abuja, Port Harcourt to Abuja and Warri to Abuja, they are all getting bridging claims because of the distance and now the cost of the diesel is high. Now, not just that, the roads are bad and the maintenance of trucks is becoming too high for marketers. If you go round now you will see that 75 per cent of filling stations in Nigeria have gone out of business. There is no diesel to take fuel to their stations. All of them are going down. And it is not that the fuel is not there, but the cost of bringing it to the stations is too high. We know that the crisis between Ukraine and Russia has contributed badly, but government has to do something fast, otherwise we are going to buy diesel in the next two weeks at N1000 to N1500/litre if care is not taken.
It is not enough; because at the time of that increase the price of diesel was at N350 to N400/litre, but now we are talking about N850/litre, while we are still in the same place. And also you don’t get that money. It takes time before you get that money from the PEF (Petroleum Equalisation Fund, now Nigerian Midstream and Downstream Petroleum Regulatory Agency). It takes months, if not years to get the money. So everybody is suffering and the only way out is for Nigerians to take or accept a little increase in petrol price in order to ensure that the forex spent on petrol subsidy is reduced for us to have forex for diesel imports too. If not our construction companies, industries, hotels, etc, will all come to a standstill because they will not be able to buy diesel. You use diesel to get fuel to fillings stations, you use it to run the generators of various businesses in Nigeria because there is no light across the country. So this is the only way out.
They may say so because they are not insiders in the business. However, this is not all about the businessman, it is about Nigerians and the sufferings we are going through. Some of us are losing but we pretend. No bank wants to give you money because it is risky. It is now like gambling. So let’s say the truth, we have to take that petrol price increase to survive, at least from now to December. Also, I want to take this opportunity to appeal to the government for I read in the news, though I’ve not heard from Dangote directly, that he (Dangote) needs $1.1bn to complete the refinery before the end of the year. I will advice if the country or all the banks could come together and assist him. This is one major remedy that we have between now and the end of the year that it will come up. Otherwise if we continue this way, forget about workers’ salary. Also, all of us will be out of business.
Of course we’ve reached out to them about this. And the response is still the same problem that we are facing – petrol. You can’t buy petrol at a high price and sell this low. Crude oil is about $130/barrel, the cost of fuel, if you hear it, you will run away; but you are selling at N165/litre. So definitely you don’t expect money to remain for government to run other activities when it spends heavily on subsidy.
The four refineries are under repairs and that would not happen this year. I am talking about something that should be done now, something temporary pending when the refineries are fixed. If we continue waiting for when the refineries come on stream before you do full deregulation, people will trek. People will walk long distances. So you have to do the right thing now and save Nigerians from the impending chaos, otherwise, if you continue waiting for the refineries to come up before you do what is necessary, all of us will go trekking. People are running away from their houses now to hotels to sleep and it is a very simple mathematics. When you run 100 litres of diesel a night on your generator, it is going to cost you about N85,000, but when you go to a hotel you pay about N50,000 and save over N30,000. Now is that what we want for our country?
We are going to do that. We are having our NEC (National Executive Council) meeting before July 7, 2022 and we are going to discuss this. We will also set up a committee that will take this assignment. We will also meet with the government on this and if that will solve this problem, then it will be fine. There is an agreement that subsidies should be removed, but we can’t remove it completely when you don’t have refineries. So what we are saying now is that it can be done gradually, pending when the refineries come on stream. It could be from now till end of the year before the Dangote refinery comes on stream or before when our own refineries start functioning.