Marketers Lament Impact of ‘Dollarisation’ of Petrol Import Charges on Downstream Investment

Peter Uzoho

Major Energies Marketers Association of Nigeria (MEMAN) has expressed concerns on the impact of foreign exchange pressures on the petroleum products supply chain, particularly petrol.
Specifically, MEMAN said the ‘dollarisation’ of import charges was inimical to investments in the downstream oil and gas industry, urging the federal government to resolve the problem.

Speaking yesterday during a webinar on Press Training on the  Introduction of Autogas, the Executive Secretary of MEMAN, Mr. Clement Isong, complained that the complexity of the forex market uncertainty has discouraged members from importing petrol.

Isong noted the challenge of putting together correct mathematical calculation of the product’s landing cost to further determine the appropriate pump price.
He said under the present industry value chain conundrum, their investment was not fully protected with the dollarisation of certain charges.
“The market and consumers are not immune to government policy that allows Nigeria Ports Authority (NPA) and the Nigerian Maritime Administration and Safety Agency, (NIMASA) to continue to charge in dollar,” Isong stated.

He said that though marketers receive products form the Nigerian National Petroleum Company Limited  (NNPC) trading arm, ship to ship products offload was transacted in dollars, which he said, contributes in pushing up the pump price.
“We are presently concerned about sustainability, efficiencies and affordability of energy for Nigerians and we are encouraging shift to energy transition specifically into gas space”, he noted.

Isong, who said though the federal government had been faithful in its avowed intervention process since it exited the petrol subsidy regime, however, pointed out that the dollarisation policy was weakening the industry and discouraging investment.

Blaming the fluctuating dollar movement and unpredictability of the rate, the MEMAN secretary said for  instance, marketers pay NNPC about $10 per metric ton, which he said translates to higher pump price given current exchange rate.
Analysing the forex impact on the downstream business, he said in 2023 when President Bola Tinubu removed the subsidy, with the exchange rate at that time, it brought the cost of a litre to about N4.85k.

He maintained that with the dollar at about N1,600 currently, it has added up to about N11.83 a litre.
Noting that at $30 per metric ton, which is N14.54 today, with dollar at N1,600, Isong said that has pushed the cost up to N28.44 and further adding up to the pump price.
On the transportation side, he said even with separate negotiations by marketers, transporters charge between N5-N8 per litre.

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

Also touching on the issues of return of subsidy, Isong said the industry was witnessing consistent intervention initiatives by government, which he said the public may have misconstrued as subsidy payment.

He said Tinubu had in July 2023 promised that the administration will 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 providing a level of stability but our advocacy is to encourage a paradigm shift to affordable energy options ” Isong explained.

Speaking at the event, a consultant on Liquefied Petroleum Gas (LPG), Femi Fanoiki, who spoke on “Transition to Gas”, said efforts were being made towards driving LPG application in both the industrial and automotive services.

Fanoiki, who posited that interventions by the government were encouraging investments in the Autogas space, however, said more infrastructure deployment will further boost the adoption process.

Also contributing, the Gas and Renewable Energy Specialist at MEMAN, Adelanke Bayo-Adepoju, who reeled out the advantages of Compressed Natural Gas (CNG), said it offers better alternative to petrol.

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