By Sebastine Obasi

There may be no sooner end in sight of the parlous state of the downstream sector in the country, as operators lament that the ongoing foreign exchange crisis (FX) and difficulties within the local distribution channel are causing a surge in the cost of Premium Motor Spirit (PMS), otherwise known as petrol.

Speaking at a panel session of the Oil Trading and Logistics, OTL, Africa Week in Lagos, Jude Nwaulune, Managing Director of Rainoil Logistics, stated that the estimated landing cost of the product currently stands at approximately N580 per litre towards the Calabar region.

Nwaulune stated, “The realities have been alluded to from the FX perspective, primarily sourcing from the parallel market, which most marketers are compelled to do. Reviewing our operational bases, the landing cost of PMS in Lagos is around N565 per litre. As we move towards the Oghara region, it’s approximately N570 per litre, and towards the Calabar area, it’s similarly within the range of N580 per litre.”

He also highlighted that independent marketers are facing challenges in 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 pumps. In this chain, the independents are beginning to miss out. Because a truck of PMS that used to be N7.5million before deregulation now stands at around N25 million. So, transporting it from the depot to the pumps has become a significant challenge.”

At present, most independents are struggling to afford the product, resulting in a growing scarcity. Along the supply chain, the cost of transportation has also increased, with diesel selling at around N1,000 per litre.

Also speaking on transition towards cleaner energy, Nwaulune called for increased investment in Compressed Natural Gas (CNG) and other cleaner fuels, as the country has adopted gas as its transitional fuel. Given the substantial proven gas reserves, he suggested that stakeholders should make more investments to catalyze the economy.

The Rainoil boss urged the government to address the numerous challenges facing the country, including insecurity, asset vandalism, and community unrest. While the Petroleum Industry Bill (PIA) is addressing some of these issues, the sanctity of contracts remains a concern, impeding potential investors. He added, “We need to unlock the supply side and create a sustainable supply and demand situation that will make the gas sector thrive.”

He also called on the government to eliminate all local transactions priced in US dollars, stating that this move would facilitate industry growth, considering the current economic indicators of the country.

Earlier this month, several petroleum product depots were deserted due to a lack of supplies caused by currency volatility. Oil marketers reported that filling stations were closing down in large numbers daily, making the industry increasingly challenging to sustain. They warned that this could result in widespread petrol shortages in the coming months.