NMDPRA, others consider payment options
By Udeme Akpan
There were indications,
weekend, that the Federal Government’s deficit spending in the downstream sector will increase by 106 per cent as landing cost of petrol rise to N315.46 per litre, from N295 per litre.
The most recent driver of the trend is the recent increase of freight rate to N20.46 per litre, from N10.46 per litre.
At the current price of N165 per litre of petrol, the government through the Nigerian National Petroleum Corporation, NNPC Limited, pays about N295 per litre as an under-recovery or subsidy.
But the level of government exposure would hit the roofs at N315.46 per litre, as the government has already expressed commitment to paying the new rate from June 2022.
Factors fueling new freight rate
Industry analysts have fingered Vanguard Public Finance Report learnt that the high prices of petroleum products, including not only petrol but also diesel, which price currently hovers at N850 per litre, have culminated in distortions in the logistic chain across Nigeria.
Consequently, it has become difficult for operators to procure adequate diesel to power their fuel tankers and move products from deports across the country.
Source of funding freight
Already the petroleum industry authorities are said to be cracking their heads on ways and
means to pay the new freight rate which was not provided for in the 2022 budget.
A top industry source, who pleaded anonymity, said: “The government has made a pronouncement after considering different options. Consultations are still ongoing. Let us wait and see what happens.”
The officials of the Nigerian Midstream and Downstream Petroleum Regulatory Authority, NMDPRA, created in August 2021 in line with the Petroleum Industry Act 2021, did not respond, at the weekend.
NMDPRA, had earlier stated: “President Muhammadu Buhari has considered and approved the upward review in freight rate for transporters to alleviate the challenges associated with the distribution of Premium Motor Spirit (PMS) nationwide.
“The approval was after due consultations with industry-wide stakeholders at the instance of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (the Authority).
“The review was necessitated by the upswing in the global price of petroleum products especially Automotive Gasoil (Diesel) and its implication on the cost of transporting Premium Motor Spirit (PMS) nationwide.
“Consequently, the Authority wishes to advise that in line with the mandate of the Authority as prescribed in the PIA (Section 31(i)) to develop and enforce a framework on tariffing and pricing for natural gas and petroleum products, the transporters freight rate has been reviewed to reflect current market realities.
“The revised freight rate takes effect from 1st June 2022 while still maintaining the current regulated PMS pump price of N165.00/Litre.
“An Inter-agency Team is being constituted to ensure reconciliation and payment of outstanding transporters claims in line with established payment procedure under the Bridging Fund Scheme. NNPC, the sole supplier of PMS, has maintained over 32 days of sufficiency in-country.
“We believe the increase in transporters freight rate will further encourage Nigerian Association of Road Transport Owners (NARTO) and other stakeholders to deploy more trucks to transport PMS nationwide to ensure adequate supply of the product”.
How high cost affects operations
In any case, the Independent Petroleum Marketers Association of Nigeria, IPMAN, has blamed ongoing petrol scarcity across the country on supply shortage and the high cost of running their operations.
IPMAN Public Relations Officer, Chief Chinedu Ukadike in a chat with Vanguard yesterday said most inland depots were dry and had no product from Lagos and other coastal depots.
Chief Ukadike stated that the high cost of freighting the product from the southern depots has also made it impossible for marketers to operate profitably despite the recent N10.46 per litre rate hike by the government.
According to him, “Depots in Makurdi, Enugu, Mossimi and Owerri cannot access petroleum products because they cannot be pumped. Since our refineries are bad, products are no longer being pumped through the pipelines. It cost marketers close to N40 per litre to freight the product to the stations from the South and that is after buying it for N162/litre from the private depot owners.”
Background of the freight rate
The Executive Director, NMDPRA, Ugbugo Ukoha, who inspected facilities in Lagos, had said: “When we observed that the high price of diesel poses a big challenge in the movement of other products, we made the representation to the minister of state for petroleum and Mr. President graciously approved that the freight rate for trucks is increased.”
”There is an addition, which we will apply to the different routes to enable trucks to move to docks easily with less burden. With these kinds of efforts from the government, we can only continue to appeal to operators within this industry to play by the rules.
“PMS is a regulated product and the prices are fixed. The ex-depot price is known. The pump price remains N165 and the authority is ever ready to enforce those rules. So, we will continue to urge Nigerians to keep within these operating rules.”
NARTO, others react
But industry leaders, who pleaded anonymity, said the government must have made adequate plans before declaring its commitment to paying the new freight rate.
Also, in a telephone interview with Public Finance, weekend, the President, NARTO, Yusuf Othman, said: “The situation in the downstream sector is very critical, due mainly to the high cost of diesel. We thank the government for coming up with the new freight, which we hope will go a long way to enhancing operations.”
“Indeed, we are hopeful that it will enable our members to deliver petrol to all parts of the nation, which has been constrained in the high price of diesel.”