FX crisis, distribution hiccups driving up petrol price – Rainoil
…says Sanctity of the contract is another issue bedeviling the industry and hampering investors
By Ndubuisi Micheal Obineme
Worried about the current situation in the downstream sector of the oil and gas, in the country, operators affirmed that the ongoing foreign exchange crisis (FX) and difficulties in the local distribution channel are pushing up the cost of Premium Motor Spirit (PMS), also known as petrol.
Jude Nwaulune, Managing Director of Rainoil Logistics said the landing cost of the product according to the company’s current estimation is about N580 towards the Calabar end.
He made this known while speaking on a panel session at the ongoing Oil Trading and Logistics (OTL) Africa Week 2023 in Lagos with the theme,’ Africa Fuels update -overview of trends and market development’.
Nwaulune said: “The realities have been alluded here from the FX point of view, basically sourcing from the parallel market, which most marketers are enforced to.
“Taking a look at our operational bases, landing PMS in Lagos is around N565. We take it towards Oghara end, it’s about N570 and towards the Calabar end, it’s equally within the N580 range.”
Rainoil’s boss said that independent marketers are having difficulties breaking even in their operations since the removal of fuel subsidies and the emergence of the foreign exchange crisis.
“You find a situation where it’s unaffordable (to land petrol and distribute it to the pump). In this chain, the independents are beginning to miss from the chain.
“So, it’s huge cost taking it from the depot end to the pump is a whole lot of challenge.”
As we speak, most independents can’t afford the product, at the moment there seems to be a beat scarcity and along the chain also, you will see that the cost of transportation has increased, diesel is about one thousand naira per liter.
Speaking on energy transition, he called for more investment in CNG and other cleaner fuels as the country has adopted Gas as its transition fuel. He said that the proven enormous gas reserve is huge enough for stakeholders to make more investments that can catalyze the economy.
He called on the government to ensure the enormous challenges confronting the country such as insecurity, asset vandalization, and community unrest are well handled, although the Petroleum Industry Bill (PIA) is addressing it.
He noted that the sanctity of the contract is another issue bedeviling the industry and hampering investors. The government should ensure that Nigeria is seen as an investment destination with the sanctity of contract, virile fiscal and commercial framework to unlock its gas industry.
He submitted that “We have to unlock the supply side and create sustainable supply and demand that make the gas sector work.”
Also, he called on the government to remove all local transactions that are being priced in US dollars, he noted that the removal will help the industry grow, looking at the current economic indices of the country.
Earlier in the month, it was noted that many petroleum product depots have been deserted due to a lack of supplies caused by currency volatility.
Oil marketers indicated that filling stations were closing down in huge numbers daily because the industry was getting increasingly difficult to maintain. According to them, this could lead to widespread petrol scarcity in the coming months.
Other persons who spoke on the panel include Adenike Labinjo, COO of Pinnacle oil and gas, Lawal Sade, MD NNPC Trading Ltd, James Gooder, Vice president, Argus Media, Maryro Mendez, Refining and Refined Products senior research analyst, at Vitol , etc.