27 January 2011

Nigeria: Kerosene, Cooking Gas Prices Soar

Scarcity of domestic fuel, mainly household kerosene and cooking gas, has returned in the domestic market as prices for the products have shot up in the wake of the yuletide season during which Nigerian National Petroleum Corporation (NNPC) boasted of fuel glut in the country.

Daily Champion investigations showed that the major sources of both domestic gas and kerosene are out of stock while prices at retail outlets have increased by over 50 percent, causing users to groan.

Market survey showed that household kerosene which is subsidized by government sells at over N100 per liter at various filling stations as against the recommended retail price of N50 per liter.

Whereas the product which is widely used by Nigerian homes had never sold at the recommended price, our survey showed that the rates at filling stations have overshot the usual N70 per liter to about N120 per liter.

The situation, Daily Champion gathered, is likely to worsen as there is no immediate measure to close the supply gap in the market following alleged reluctance of the Petroleum Products Pricing Regulatory Agency (PPPRA) to issue importation licenses to marketers.

A source in the Major Oil Marketers Association of Nigeria (MOMAN), said NNPC has not supplied the market kerosene for a year now, forcing dealers that run out of stock to enter third party supply deals at higher costs.

The source said it was difficult for the marketers to stake funds on importation of kerosene because, according to him, the commercial pricing status of the product is not established in concrete terms.

He argued that whereas government has declared the product deregulated, it has continued to subsidize the pump prices through the NNPC, making it impossible for private importers to compete in the market.

Also, the price domestic gas has shot up to over N4000 per 12.5 kilograms of the clean burning fuel at organized retail outlets as dealers grapple with scarcity of the products which is exported from the country.

Marketers who spoke on the development anonymously said the sharp rise in the prices of both domestic kerosene and liquefied petroleum gas (LPG) also called cooking gas was a product of scarcity in the market, adding that most of them had to procure the products third party suppliers at higher prices.

Market sources said the exclusive license for importation of kerosene was awarded NNPC by PPPRA, making it difficult for the marketers to source the subsidized product independently.

Daily Champion surveys showed that major petroleum products depot operators in Lagos that normally stock imported products for NNPC did not have kerosene early in the week, a situation that gave rise to price manipulation by retail dealers.

Cooking gas sources in the local market also pointed at shortfalls in the supply of the product to the local distributors of the product, decrying round-tripping of the same products exported from Nigeria at the international market.

They blamed the producers of LPG in the country for not making adequate supply to the domestic market before pushing the products into the international market from where they target higher margins in dollar revenue in hard currency.

A source who spoke on the issue said the domestic market could not absorb the volume of cooking gas produced by multinational oil firms in the country, wondering why regulators in the industry have allowed the domestic market to be starved of supply while international market is full with petroleum gas from Nigeria.

He said local dealers in the products have no option than to import Nigerian LPG from the international market at higher cost which is transferred to consumers at the retail points.

A source at Pipeline and Products Marketing Company (PPMC) of NNPC told Daily Champion that the scarcity in the market resulted from sabotage of crude oil feedstock lines to the local refineries which have been responsible for internal supply of kerosene.

He said the refineries have the capacity to meet internal demand for domestic kerosene, leading to a stop in the importation of the product.

Our source said NNPC took the option to meet internal supply of household kerosene (HHK) locally after it was discovered that the private marketers in the system plug into the supplies of the dual purpose kerosene (DPK) by the corporation to service their aviation markets.

He denied reports that NNPC monopolized importation of kerosene in the market and challenged the private marketing companies in the country to rise up to the challenge of servicing their customers in the country with domestic fuels.

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