FG Still Swaps Crude in Exchange for 1m Metric Tons of Petrol, Says Ex-NNPC Official

*Petrol landing cost rises to N1,117/litre

Peter Uzoho

A former Chief Operating Officer in charge of the Upstream Business Unit at the defunct Nigerian National Petroleum Company Limited (NNPC), Mr. Bello Rabiu, has said that the country through the state oil firm still exchanges 450,000 barrels per day (bpd) of crude oil for about 1 million metric tons (MT) of petrol, equivalent to 1.341 billion litres.

Rabiu said the finished products were being supplied through the Direct Sale Direct Purchase (DSDP) arrangement simply known as crude swap between some international traders and NNPC, which is the sole importer of petrol into Nigeria.
The ex-NNPC official spoke just as petroleum downstream operators under the aegis of Major Energy Marketers Association of Nigeria (MEMAN)  disclosed that the current landing cost of petrol into the country now stands at N1,117 per litre
Also, the Founder and Chief Consultant at B. Adedipe Associates Limited, Abiodun Adedipe, posited that the frustration in the Nigerian petrol supply value chain was caused by the unavailability of feedstock for local refineries, particularly 650,000 bpd Dangote Refinery, which has the capacity to meet domestic petrol demand.

The trio spoke at a webinar organised by MEMAN, where the  stakeholders called for a truly fair and competitive petroleum downstream market to keep the supply and prices of products at a reasonable level.
In his presentation, Rabiu  argued that the removal of petrol subsidy as claimed by the federal government was not enough to depict deregulation.
He maintained that it also required the creation of competitive market environment that will guarantee the supply of products at commercial prices to customers.

Rabiu, who is now an independent consultant, condemned the importation of petrol solely by NNPC, saying, “This is a monopoly, which is against deregulation procedures “
He said: “With consumption capacity estimated at about one million MT (1.341 billion litres) of currently being supplied through DSDP importation programme of NNPC, whereby local and international traders are contracted to lift Nigerian crude oil owned by NNPCL and deliver petroleum products in ex-Lagos.
“This remains the only supply source of PMS in the Nigerian market due to inability of other players to secure forex for direct importation. Thus, NNPC is effectively the only supplier of PMS in Nigeria today.

“Being the only supplier and importer of PMS in Nigeria, NNPC is currently the determinant of PMS price as other players are only adding their margins to arrive at pump price depending on location.”
He therefore called for a review of the current business model and institutional arrangements of the deregulation policy which has resulted in one dominant player’s power to import and fix the prices of petrol across the nation.
Rabiu added that this was not consistent with the provisions of Petroleum Industry Act (PIA) 2021 which envisages the participation of multiple players operating under open competitive environment, with multiple supply sources from import and domestic refineries under a level playing field, aimed at delivering products at lowest possible prices at the pump.

“Under the current model, No one knows the actual cost of importing a litre of PMS into the Nigerian market except NNPC. The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) no longer publish the pricing template to enable the citizens know the official landing cost of any product Ex-Lagos since the announcement of full price deregulation and total removal of PMS subsidies,” he said.
According to him, this situation has resulted in total lack of accountability and substantial revenue leakages that cannot be quantified due to lack of transparency in the process.

“If we can be told what Customs duty is daily in Nigeria, we should be equally told how much is the fuel being imported.
“For example, NNPC insists there is no more subsidy in the pricing of PMS but the difference between the Automotive Gas Oil (AGO) and PMS open market prices clearly shows some elements of subsidies or hidden cost recovery in the open market prices of PMS across the nation” he stated.
Speaking at the session, Executive Secretary of MEMAN, Mr. Clement Isong, revealed that the current landing cost of petrol into the country now stands at N1,117 per litre.

He also disclosed that the landing cost for diesel stands at N1,157 per litre, while that of Aviation Turbine Kerosene (ATK) is N1,217 per litre, explaining  that the  administrative cost and freight cost were among the cost components.
Isong, who informed the association would henceforth publish the landing cost data on a daily basis, encouraged the private sector to invest in benchmarking, adding that there must be free flow of marketing information.

According to him, “henceforth MEMAN will be publishing petroleum products landing cost of PMS, ATK, and AGO on daily basis, newsletter on weekly basis, quarterly industry report and yearly reports.”

Om his part, Adedipe called on the federal government and the NNPC to urgently announce the needed policy guidelines on the operation and commercial arrangement of the $20 billion facility as they affect the market.

He stated that the entrance of the Ibeju-Lekki-based refinery in the downstream petroleum sector was a game-changer in Nigeria’s journey towards full deregulation, adding that the world’s largest single-train refinery would soon become a major supplier of petroleum products in the Nigerian market with some identified implications.

Adedipe expressed concerns on the “complete silence of government policy makers, regulatory authorities and NNPC on the operational readiness of Dangote Refinery and the new business model and commercial arrangement”.

Adedipe therefore urged the regulators to act in a way that enables the market to determine the price of petroleum products and services in medium to long term.

But in the immediate short term, he said there must be regulatory intervention to ensure smooth entry of Dangote Refinery into the supply chain.

This intervention, he canvassed, should guarantee consumer protection and delivery of products to the market at cost reflective prices.

“Perhaps, it is appropriate to return to guided deregulation with reintroduction of pricing template at this time to encourage efficiency and competitive market behaviour,” he added.

On the way forward for the country and the downstream sector, the economist recommended that the government should strive to collaborate with all stakeholders to effectively implement the Petroleum Industry Act (PIA) 2021 and achieve lowest cost of refining or importation of products into the Nigerian market.

He urged the regulators to do the needful by engaging all relevant stakeholders and issuing appropriate guidelines that will guarantee cost recovery by all refiners and petrol importers under a level playing field.

Furthermore, Adedipe advocated that all anti-competitive practices such as collusion and abuse of market share in establishing prices of petroleum products should be collectively resisted by industry players

He called for the establishment of transparency in the downstream value chain to enable consumers know and realise value for what they are paying, adding that there should be proper management of the price volatility through announcement of monthly guided price.

In addition, the analyst canvassed that the NNPCL Pipelines and Storage Company should be repositioned and adequately funded under a Public Private Partnership (PPP) arrangement to operate as a neutral transportation and storage entity, serving NNPC and all other oil marketing companies under an open access regime.