Hector Igbikiowubo, Yemie Adeoye and Victor Ahiuma-Young with Agency Reports
16 December 2008
Major oil marketers are warming up to plunge the nation into another round of fuel crisis over N62 billion unpaid claims owed them by the Federal Government through the Petroleum Product Pricing and Regulatory Agency (PPPRA).
Indication to the impending crisis emerged yesterday when officials of the Major Marketers Association spoke with energy correspondents in Lagos.
This is coming on the heels of a sharp rise in prices of crude oil which moved toward $50 a barrel yesterday as investors anticipated OPEC will announce a large production cut at its meeting this week, with implications for the economy of member countries including, Nigeria.
Light sweet crude for January delivery was up $3.24 to $49.52 a barrel in electronic trading on the New York Mercantile Exchange by mid-afternoon in Europe. The contract briefly reached $50.05 before falling back. On Friday, it fell $1.70 to settle at $46.28.
Meanwhile, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), has called on President Yar'Adua to convene a stakeholders' meeting to fashion out a way forward for the country's oil industry to cope with the challenges of the falling crude price and vagaries of the international crude market.
In London, January Brent crude gained $3.40 to $49.81 on the ICE Futures exchange.
The Organization of Petroleum Exporting Countries, which accounts for 40 per cent of global supply, has signaled its plans to announce a substantial reduction of output quotas at its meeting Wednesday in Algeria.
"The extent of such cuts is still unclear and this uncertainty has been a source of continuing volatility in future markets," said a report by analysts at KBC Market Services in Great Britain.
Kuwaiti Oil Minister, Mohammed al-Eleim said yesterday that OPEC was "undoubtedly inclined" to cut production. But he added that any decision would balance the need for a cut with its impact on the ailing world economy and producer nations' need for revenue to fund development projects.
The major problem being faced by the marketers now is that the Federal Government seems set to pay the debt at the earlier stipulated exchange rate of N118 to US$1.00 as against the current trend in the exchange market which currently hovers between N127 and N135, a trend which leaves a huge deficit on the part of the marketers.
Specifically, the marketers are asking that the Federal Government should pay them the huge overdue debt at the current exchange rate to enable them meet up with their obligation.
Vanguard investigations however revealed that there are several issues in the oil and gas sector which makes it almost impossible to avoid a fresh round of petroleum scarcity as Nigerians brace up for the Yuletide.
Investigations has shown that there is almost an absence of petroleum product importation as marketers both major and independent continue to find it difficult to cope with the current trend of doing business in the sector.
An independent marketer who spoke to Vanguard on the condition of anonymity stated that apart from Nipco Plc which brought in a vessel recently, there has not been any product importation or discharge of product for some time now at any port of entry.
He stated further that some independent marketers had even fled the country as it becomes more difficult for them to operate since the cost of importation has gone higher in view of the current exchange rate and the huge debt being owed them by the federal government.
"Some of them have fled the country as the banks has continued to make life unbearable for them and the government on the other hand would not pay the marketers' claim for bringing in products and distributing accordingly. How can anyone do business in this kind of hostile environment?" he queried.
Responding to our enquiries over the telephone, the spokesperson for Nipco Plc Mr. Abiodun Lawal confirmed that the company actually offloaded products up to 50 million litres of petrol during the recent Sallah holiday.
He stated further that the company was discharging products to both major and independent marketers all through the sallah holiday and that a second vessel is berthing and getting set to offload at the moment.
Vanguard investigations also revealed that following the current trend which has made many marketers unable to meet their obligations, the banks have refused to grant facilities to any company bringing in petroleum products to the country.
Some of the major marketers who spoke to Vanguard stated that what the government could help them sustain their import business is for the Central Bank to consider selling dollars directly to importers.
Meanwhile, the umbrella body for the senior workers in the nation's petroleum industry however said it was too early to demand that the fallen crude price in the international market reflected in the domestic prices of products
President of PENGASSAN, Comrade Babatunde Ogun, in a chat with Vanguard, said a stakeholders' meeting at this time is needed to encourage investors into the refining sector of the oil industry in Nigeria.
According to him: "One thing that is important is government stronghold in fixing the fuel price in Nigeria. We believe that the way forward for now as the price in the international market is on the downward trend, is for all the stakeholders, government, labour civil society and others to sit down and agree and have a pendulum of fixing and determining whatever the price of fuel should be, if it goes above a particular price level, because of the income level of the citizens, the government would come in and subsidise with a certain amount.
"But now, it is too early and not completely in our best interest to demand that the fallen crude price in the international market should reflect in the domestic price of products.
We know very well that before now despite government inefficiency and Nigerian National Petroleum Corporation (NNPC), have caused most of the wastage, even if we refined in Nigeria, the price being sold before might not be the actual price to be sold now. Because there is downward price now does not mean government has stopped subsizing.
The best thing for the nation is that now that the price is down, government should call all the stakeholders for a meeting to fashion out a way forward. With that, the nation can encourage investors to come in.
Investors will definitely know that even if they are in the refining sector, anytime the price goes up, government has a pendulum that can always absorb the shock and they would not be afraid of the price fixing regime of petroleum products in Nigeria."
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